Rule 17f-6

Securities and Exchange Commission

§ 270.17f–6

in favor of the Eligible Foreign Custodian or its creditors, except a claim of
payment for their safe custody or administration or, in the case of cash deposits, liens or rights in favor of creditors of the custodian arising under
bankruptcy, insolvency, or similar
laws;
(C) That beneficial ownership of the
Foreign Assets will be freely transferable without the payment of money or
value other than for safe custody or administration;
(D) That adequate records will be
maintained identifying the Foreign Assets as belonging to the Fund or as
being held by a third party for the benefit of the Fund;
(E) That the Fund’s independent public accountants will be given access to
those records or confirmation of the
contents of those records; and
(F) That the Fund will receive periodic reports with respect to the safekeeping of the Foreign Assets, including, but not limited to, notification of
any transfer to or from the Fund’s account or a third party account containing assets held for the benefit of
the Fund.
(ii) The contract may contain, in lieu
of any or all of the provisions specified
in paragraph (c)(2)(i) of this section,
other provisions that the Foreign Custody Manager determines will provide,
in their entirety, the same or a greater
level of care and protection for the
Foreign Assets as the specified provisions, in their entirety.
(3)(i) Monitoring the Foreign Custody
Arrangements. The Foreign Custody
Manager has established a system to
monitor the appropriateness of maintaining the Foreign Assets with a particular custodian under paragraph
(c)(1) of this section, and to monitor
performance of the contract under
paragraph (c)(2) of this section.
(ii) If an arrangement with an Eligible Foreign Custodian no longer meets
the requirements of this section, the
Fund must withdraw the Foreign Assets from the Eligible Foreign Custodian as soon as reasonably practicable.
(d) Registered Canadian Funds. Any
Registered Canadian Fund may place
and maintain its Foreign Assets outside the United States in accordance

with the requirements of this section,
provided
(1) The Foreign Assets are placed in
the care of an overseas branch of a U.S.
Bank that has aggregate capital, surplus, and undivided profits of a specified amount, which must not be less
than $500,000; and
(2) The Foreign Custody Manager is
the Fund’s board of directors, its investment adviser or officers, or a U.S.
Bank.
NOTE TO § 270.17f–5: When a Fund’s (or its
custodian’s) custody arrangement with an
Eligible Securities Depository (as defined in
§ 270.17f–7) involves one or more Eligible Foreign Custodians through which assets are
maintained with the Eligible Securities Depository, § 270.17f–5 will govern the Fund’s (or
its custodian’s) use of each Eligible Foreign
Custodian, while § 270.17f–7 will govern an Eligible Foreign Custodian’s use of the Eligible
Securities Depository.
[65 FR 25637, May 3, 2000]

§ 270.17f–6 Custody of investment company assets with Futures Commission Merchants and Commodity
Clearing Organizations.
(a) A Fund may place and maintain
cash, securities, and similar investments with a Futures Commission Merchant in amounts necessary to effect
the Fund’s transactions in ExchangeTraded Futures Contracts and Commodity Options, Provided that:
(1) The manner in which the Futures
Commission Merchant maintains the
Fund’s assets shall be governed by a
written contract, which provides that:
(i) The Futures Commission Merchant shall comply with the segregation requirements of section 4d(2) of
the Commodity Exchange Act (7 U.S.C.
6d(2)) and the rules thereunder (17 CFR
Chapter I) or, if applicable, the secured
amount requirements of rule 30.7 under
the Commodity Exchange Act (17 CFR
30.7);
(ii) The Futures Commission Merchant, as appropriate to the Fund’s
transactions and in accordance with
the Commodity Exchange Act (7 U.S.C.
1 through 25) and the rules and regulations thereunder (including 17 CFR
part 30), may place and maintain the
Fund’s assets to effect the Fund’s
transactions with another Futures
Commission Merchant, a Clearing Organization, a U.S. or Foreign Bank, or

837

VerDate Aug<31>2005

10:28 Apr 25, 2006

Jkt 208056

PO 00000

Frm 00847

Fmt 8010

Sfmt 8010

Y:\SGML\208056.XXX

208056

§ 270.17f–7

17 CFR Ch. II (4–1–06 Edition)

a member of a foreign board of trade,
and shall obtain an acknowledgment,
as required under rules 1.20(a) or 30.7(c)
under the Commodity Exchange Act [17
CFR 1.20(a) or 30.7(c)], as applicable,
that such assets are held on behalf of
the Futures Commission Merchant’s
customers in accordance with the provisions of the Commodity Exchange
Act; and
(iii) The Futures Commission Merchant shall promptly furnish copies of
or extracts from the Futures Commission Merchant’s records or such other
information pertaining to the Fund’s
assets as the Commission through its
employees or agents may request.
(2) Any gains on the Fund’s transactions, other than de minimis
amounts, may be maintained with the
Futures Commission Merchant only
until the next business day following
receipt.
(3) If the custodial arrangement no
longer meets the requirements of this
section, the Fund shall withdraw its
assets from the Futures Commission
Merchant as soon as reasonably practicable.
(b) For purposes of this section:
(1) Clearing Organization means a
clearing organization as defined in rule
1.3(d) under the Commodity Exchange
Act (17 CFR 1.3(d)) and includes a clearing organization for a foreign board of
trade.
(2) Exchange-Traded Futures Contracts
and Commodity Options means commodity futures contracts, options on
commodity futures contracts, and options on physical commodities traded
on or subject to the rules of:
(i) Any contract market designated
for trading such transactions under the
Commodity Exchange Act and the
rules thereunder; or
(ii) Any board of trade or exchange
outside the United States, as contemplated in Part 30 under the Commodity Exchange Act.
(3) Fund means an investment company registered under the Act (15
U.S.C. 80a–1 et seq.).
(4) Futures Commission Merchant
means any person that is registered as
a futures commission merchant under
the Commodity Exchange Act and that
is not an affiliated person of the Fund
or an affiliated person of such person.

(5) U.S. or Foreign Bank means a
bank, as defined in section 2(a)(5) of the
Act (15 U.S.C. 80a–2(a)(5)), or a banking
institution or trust company that is incorporated or organized under the laws
of a country other than the United
States and that is regulated as such by
the country’s government or an agency
thereof.
[61 FR 66212, Dec. 17, 1996]

§ 270.17f–7 Custody of investment company assets with a foreign securities depository.
(a) Custody arrangement with an eligible securities depository. A Fund, including a Registered Canadian Fund, may
place and maintain its Foreign Assets
with an Eligible Securities Depository,
provided that:
(1) Risk-limiting safeguards. The custody arrangement provides reasonable
safeguards against the custody risks
associated with maintaining assets
with the Eligible Securities Depository, including:
(i) Risk analysis and monitoring. (A)
The fund or its investment adviser has
received from the Primary Custodian
(or its agent) an analysis of the custody risks associated with maintaining
assets with the Eligible Securities Depository; and
(B) The contract between the Fund
and the Primary Custodian requires
the Primary Custodian (or its agent) to
monitor the custody risks associated
with maintaining assets with the Eligible Securities Depository on a continuing basis, and promptly notify the
Fund or its investment adviser of any
material change in these risks.
(ii) Exercise of care. The contract between the Fund and the Primary Custodian states that the Primary Custodian will agree to exercise reasonable
care, prudence, and diligence in performing the requirements of paragraphs (a)(1)(i)(A) and (B) of this section, or adhere to a higher standard of
care.
(2) Withdrawal of assets from eligible securities depository. If a custody arrangement with an Eligible Securities Depository no longer meets the requirements of this section, the Fund’s Foreign Assets must be withdrawn from
the depository as soon as reasonably
practicable.

838

VerDate Aug<31>2005

10:28 Apr 25, 2006

Jkt 208056

PO 00000

Frm 00848

Fmt 8010

Sfmt 8010

Y:\SGML\208056.XXX

208056