NYSBL 100 & 131(3)July 25, 2008
This responds to your letter of May 14, 2008 to Deputy Superintendent and Counsel Marjorie Gross on behalf of your client, [---] a New York business corporation. That letter enquired whether [---] could conduct certain activities without obtaining the powers of a trust company under the New York Banking Law (the "NYBL"). You indicated that in furtherance of such activities, [---] had already registered as a "transfer agent" with the Securities and Exchange Commission ("SEC").
You have advised that [---] proposes to act in New York as a depository for unsponsored ADR programs. In this regard:
- [---] would issue ADRs representing the shares of foreign issuers. The shares underlying the ADRs issued by [---] would be held outside the United States by a securities custodian acting on behalf of [---].
- [---] would not have a legal relationship with, or be acting on behalf of, the foreign issuers of the stock with respect to which it would issue ADRs.
- The rights and obligations of the holders of the ADRs vis-a-vis [---] would be governed by the terms of a depository receipt ("Depository Receipt") in the form submitted to this office. In accord with the Depository Receipt, [---] would provide certain services to the holders of the ADRs. [---] would register the issuance, transfer and cancellation of the ADRs. [---]'s functions would also include the receipt of the payment of dividends and other distributions from the securities custodians outside the United States. [---] would then convert such payments into U.S. dollars and forward the amounts so converted to the ADR holders entitled thereto.
Section 100.1 of the NYBL grants a New York-chartered trust company or bank with fiduciary powers the power:
To act as the fiscal or transfer agent of... any corporation; and in such capacity to receive and disburse money, to transfer, register and countersign certificates of stock, bonds or other evidences of indebtedness or other securities ....
Section 131.3 of the NYBL provides in relevant part that:
no corporation other than a trust company shall have or exercise in this state any of the powers specified in [Section 100.1 of the NYBL] ....
Although [---] acknowledges that its proposed activity would cause it to be a transfer agent as defined in the Securities Exchange Act, [---] represents that it will not be a transfer agent within the meaning of Section 100.1 of the NYBL because it will not be acting in a fiduciary capacity:
- When the depository of an unsponsored ADR program performs the functions of a transfer agent with regard to the ADRs that it has issued, it acts on behalf of itself as issuer of the ADRs rather than as agent for the foreign issuers of the stock underlying such ADRs. Accordingly, [---] will not act on behalf of such foreign issuers or be a fiduciary with respect to such issuers.
- Under the terms of the Depository Receipt, [---] will perform only limited and specified functions with respect the shares underlying the ADRs. It will not exercise general investment or dispositive discretion over such shares and will not have discretion to act in other respects on behalf of the holders of the ADRs. Therefore, the obligations of [---] will not cause it to be a fiduciary with respect to such holders.
This Department has long taken the view that the prohibition of Section 131.3 of the NYBL applies only to a corporation that is acting in a fiduciary capacity and not one that is exercising only ministerial functions. Accordingly, this Department concurs that [---] would not be acting as a fiduciary and would not be subject to the prohibition of Section 131.3, provided that the activities of [---] were limited as described above.
The foregoing conclusions are based on the representations made in your letter of May 14, 2008 and on the terms of the Depository Receipt that you provided to supplement such letter. Moreover, the views expressed in this letter relate solely to the application of the NYBL. This Department takes no view on the application of other laws or regulations including, without limitation, the securities laws.
We hope that this letter is helpful.
Very truly yours,
John B. Sullivan