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6000 - Bank Holding Company Act
§ 225.125 Investment adviser activities.
(a) Effective February 1, 1972, the Board of Governors amended
§ 225.4(a) of Regulation
Y to add ""serving as investment adviser, as defined in section
2(a)(20) of the Investment Company Act of 1940, to an investment
company registered under that Act" to the list of activities it has
determined to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. During the course
of the Board's consideration of this amendment several questions arose
as to the scope of such activity, particularly in view of certain
restrictions imposed by sections 16, 20, 21 and 32 of the Banking Act
of 1933 (12 U.S.C. 24, 377, 378, 78) (sometimes referred to hereinafter
as the "Glass-Steagall Act provisions") and the United States
Supreme Court's decision in Investment Company Institute v. Camp,
401 U.S. 617 (1971). The Board's views with respect to some of
these questions are set forth below.
(b) It is clear from the legislative history of the Bank Holding
Company Act Amendments of 1970 (84 Stat. 1760) that the Glass-Steagall
Act provisions were not intended to be affected thereby. Accordingly,
the Board regards the Glass-Steagall Act provisions and the Board's
prior interpretations thereof as applicable to a holding company's
activities as an investment adviser. Consistently with the spirit and
purpose of the Glass-Steagall Act, this interpretation applies to all
bank holding companies registered under the Bank Holding Company Act
irrespective of whether they have subsidiaries that are member banks.
(c) Under § 225.4(a)(5), as amended, bank holding companies
(which term, as used herein, includes both their bank and nonbank
subsidiaries) may, in accordance with the provisions of § 225.4(b),
act as investment advisers to various types of investment companies,
such as ""open-end'' investment companies (commonly referred to as
"mutual funds") and "closed-end" investment companies.
Briefly, a mutual fund is an investment company which, typically, is
continuously engaged in the issuance of its shares and stands ready at
any time to redeem the securities as to which it is the issuer; a
closed-end investment company typically does not issue shares after its
initial organization except at infrequent intervals and does not stand
ready to redeem its shares.
(d) The Board intends that a bank holding company may exercise all
functions that are permitted to be exercised by an "investment
adviser" under the Investment Company Act of 1940, except to the
extent limited by the Glass-Steagall Act provisions, as described, in
part, hereinafter.
(e) The Board recognizes that presently most mutual funds are
organized, sponsored and managed by investment advisers with which they
are affiliated and that their securities are distributed to the public
by such affiliated investment advisers, or subsidiaries or affiliates
thereof. However, the Board believes that (1) the Glass-Steagall Act
provisions do not permit a bank holding company to perform all such
functions, and (2) it is not necessary for a bank holding company to
perform all such functions in order to engage effectively in the
described activity.
(f) In the Board's opinion, the Glass-Steagall Act provisions, as
interpreted by the U.S. Supreme Court, forbid a bank holding company to
sponsor, organize or control a mutual
{{2-28-06 p.6110.28-L-16}}fund. However,
the Board does not believe that such restrictions apply to closed-end
investment companies as long as such companies are not primarily or
frequently engaged in the issuance, sale, and distribution of
securities. A bank holding company should not act as investment adviser
to an investment company that has a name similar to the name of the
holding company or any of its subsidiary banks, unless the prospectus
of the investment company contains the disclosures required in
paragraph (h) of this section. In no case should a bank holding company
act as investment advisor to an investment company that has either the
same name as the name of the holding company or any of its subsidiary
banks, or a name that contains the word "bank."
(g) In view of the potential conflicts of interests that may exist,
a bank holding company and its bank and nonbank subsidiaries should not
purchase in their sole discretion, in a fiduciary capacity (including
as managing agent), securities of any investment company for which the
bank holding company acts as investment adviser unless, the purchase is
specifically authorized by the terms of the instrument creating the
fiduciary relationship, by court order, or by the law of the
jurisdiction under which the trust is administered.
(h) Under section 20 of the Glass-Steagall Act, a member bank is
prohibited from being affiliated with a company that directly, or
through a subsidiary, engages principally in the issue, flotation,
underwriting, public sale, or distribution of securities. A bank
holding company or its nonbank subsidiary may not engage, directly or
indireclty, in the underwriting, public sale or distribution of
securities of any investment company for which the holding company or
any nonbank subsidiary provides investment advice except innce
compliance with the terms of section 20, and only after obtaining the
Board's approval under section 4 of the Bank Holding Company Act and
subject to the limitations and disclosures required by the Board in
those cases. The Board has determined, however, that the conduct of
securities brokerage activities by a bank holding company or its
nonbank subsidiaries, when conducted individually or in combination
with investment advisory activities, is not deemed to be the
underwriting, public sale, or distribution of securities prohibited by
the Glass-Steagall Act, and the U.S. Supreme Court has upheld that
determination. See Securities Industry Ass'n v. Board of
Governors, 468 U.S. 207 (1984); see also Securities Industry
Ass'n v. Board of Governors, 821 F.2d 810 (D.C. Cir. 1987),
cert. denied, 484 U.S. 1005 (1988). Accordingly, the Board
believes that a bank holding company or any of its nonbank subsidiaries
that has been authorized by the Board under the Bank Holding Company
Act to conduct securities brokerage activities (either separately or in
combination with investment advisory activities) may act as agent, upon
the order and for the account of customers of the holding company or
its nonbank subsidiary, to purchase or sell shares of an investment
company for which the bank holding company or any of its subsidiaries
acts as an investment adviser. In addition, a bank holding company, or
any of its nonbank subsidiaries that has been authorized by the Board
under the Bank Holding Company Act to provide investment advice to
third parties generally (either separately or in combination with
securities brokerage services) may provide investment advice to
customers with respect to the purchase or sale of shares of an
investment company for which the holding company or any of its
subsidiaries acts as an investment adviser. In the event that a bank
holding company or any of its nonbank subsidiaries provides brokerage
or investment advisory services (either separately or in combination)
to customers in the situtations described above, at the time the
service is provided the bank holding company should instruct its
officers and employees to caution customers to read the prospectus of
the investment company before investing and must advise customers in
writing that the investment company's shares are not insured by the
Federal Deposit Insurance Corporation, and are not deposits,
obligations of, or endorsed or guaranteed in any way by, any bank,
unless that happens to be the case. The holding company or nonbank
subsidiary must also disclose in writing to the customer the role of
the company or affiliate as adviser to the investment company. These
disclosures may be made orally so long as written disclosure is
provided to the customer immediately thereafter. To the extent that a
bank owned by a bank holding company engages in providing advisory or
brokerage services to bank customers in connection with an investment
company advised by the bank holding company or a
{{2-28-06 p.6110.28-L-17}}nonbank
affiliate, but is not required to make disclosures comparable to the
disclosures required to be made by bank holding companies providing
such services, the bank holding company should require its subsidiary
bank to make the disclosures required in this paragraph to be made by a
bank holding company that provides such advisory or brokerage services.
(i) Acting in such capacities as registrar, transfer agent, or
custodian for an investment company is not a selling activity and is
permitted under § 225.4(a)(4) of Regulation Y. However, in view of
potential conflicts of interests, a bank holding company which acts
both as custodian and investment adviser for an investment company
should exercise care to maintain at a minimal level demand deposit
accounts of the investment company which are placed with a bank
affiliate and should not invest cash funds of the investment company in
time deposit accounts (including certificates of deposit) of any bank
affiliate.
[Codified to 12 C.F.R. § 225.125]
[Source: 37 Fed. Reg. 1464, January 29, 1972, effective
February 1, 1972; amended at 57 Fed. Reg. 30391, July 9, 1992,
effective August 10, 1992; 61 Fed. Reg. 45875, August 30, 1996,
effective September 30, 1996; 62 Fed. Reg. 9343, February 28, 1997,
effective April 21, 1997]
§ 225.126 Activities not closely related to banking.
Pursuant to section 4(c)(8)
of the Bank Holding Company Act and
§ 225.4(a) of Regulation
Y, the Board of Governors has determined that the following activities
are not so closely related to banking or managing or controlling banks
as to be a proper incident thereto:
(a) Insurance premium funding--that is, the combined sale of mutual
funds and insurance.
(b) Underwriting life insurance that is not sold in connection with
a credit transaction by a bank holding company, or a subsidiary
thereof.
(c) Real estate brokerage (see 1972 Fed. Res. Bulletin 428).
(d) Land development (see 1972 Fed. Res. Bulletin 429).
(e) Real estate syndication.
(f) Management consulting (see 1972 Fed. Res. Bulletin 571).
(g) Property management (see 1972 Fed. Res. Bulletin 652).
[Codified to 12 C.F.R. § 225.126]
[Source: 37 Fed. Reg. 20329, September 29, 1972; 37 Fed. Reg.
21938, October 17, 1972; 54 Fed. Reg. 37302, September 8, 1989,
effective October 10, 1989]
§ 225.127 Investment in corporations or projects designed
primarily to promote community welfare.
(a) Under
§ 225.4(a)(7) of
Regulation Y, a bank holding company may, in accordance with the
provisions of § 225.23, engage in "making equity and debt
investments in corporations or projects designed primarily to promote
community welfare, such as the economic rehabilitation and development
of low-income areas." The Board included that activity among those
the Board has determined to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto, in
order to permit bank holding companies to fulfill their civic
responsibilities. As indicated hereinafter in this interpretation, the
Board intends § 225.25(b)(6) to enable bank holding companies to take
an active role in the quest for solutions to the Nation's social
problems. Although the interpretation primarily focuses on low- and
moderate-income housing, it is not intended to limit projects under
§ 225.25(b)(6) to that
area. Other investments primarily designed to promote community welfare
are considered permissible, but have not been defined in order to
provide bank holding companies flexibility in approaching community
problems. For example, bank holding companies may utilize this
flexibility to provide new and creative approaches to the promotion of
employment opportunities for low-income persons. Bank
{{2-28-06 p.6110.28-L-18}}holding
companies possess a unique combination of financial and managerial
resources making them particularly suited for a meaningful and
substantial role in remedying our social ills. Section 225.25(b)(6) is
intended to provide an opportunity for them to assume such a role.
(b) Under the authority of § 225.25(b)(6), a bank holding company
may invest in community development corporations established pursuant
to Federal or State law. A bank holding company may also participate in
other civic projects, such as a municipal parking facility sponsored by
a local civic organization as a means to promote greater public use of
the community's facilities.
(c) Within the category of permissible investments under
§ 225.25(b)(6) are investments in projects to construct or
rehabilitate multi-family low- or moderate-income housing with respect
to which a mortgage is insured under sections 221(d)(3), 221(d)(4), or
236 of the National Housing Act (12 U.S.C. 1701) and investments in
projects to construct or rehabilitate low- or moderate-income housing
which is financed or assisted by direct loan, tax abatement, or
insurance under provisions of State or local law, similar to the
aforementioned Federal programs, provided that, with respect to all
such projects the owner is, by statute, regulation, or regulatory
authority, limited as to the rate of return on his investment in the
project, as to rentals or occupancy charges for units in the project,
and in such other respects as would be a "limited dividend
corporation" (as defined by the Secretary of Housing and Urban
Development).
(d) Investments in other projects that may be considered to be
designed primarily to promote community welfare include but are not
limited to: (1) Projects for the construction or rehabilitation of
housing for the benefit of persons of low- or moderate-income, (2)
projects for the construction or rehabilitation of ancillary local
commercial facilities necessary to provide goods or services
principally to persons residing in low- or moderate-income housing, and
(3) projects designed explicitly to create improved job opportunities
for low- or moderate-income groups (for example, minority equity
investments, on a temporary basis, in small or medium-sized
locally-controlled businesses in low-income urban or other economically
depressed areas). In the case of de novo projects, the copy of the
notice with respect to such other projects which is to be furnished to
Reserve Banks in accordance with the provisions of § 225.23 should be
accompanied by a memorandum which demonstrates that such projects meet
the objectives of § 225.25(b)(6).
(e) Investments in corporations or projects organized to build or
rehabilitate high-income housing, or commercial, office, or industrial
facilities that are not designed explicitly to create improved job
opportunities for low-income persons shall be presumed not to be
designed primarily to promote community welfare, unless there is
substantial evidence to the contrary, even though to some extent the
investment may benefit the community.
(f) Section 6 of the Depository Institutions Disaster Relief Act of
1992 permits state member banks (12 U.S.C. 338a) and national banks (12
U.S.C. 24 (Eleventh)) to invest in the stock of community development
corporations that are designed primarily to promote the public welfare
of low- and moderate-income communities and persons in the areas of
housing, services and employment. The Board and the Office of the
Comptroller of the Currency have adopted rules that permit state member
banks and national banks to make certain investments without prior
approval. The Board believes that these rules are consistent with the
Board's interpretation of, and decisions regarding, the scope of
community welfare activities permissible for bank holding companies.
Accordingly, approval received by a bank holding company to conduct
activities designed to promote the community welfare under section
4(c)(8) of the Bank Holding Company Act
(12 U.S.C. 1843(c)(8)) and
§ 225.25(b)(6) of the Board's Regulation Y (12 CFR 225.25(b)(6))
includes approval to engage, either directly or through a subsidiary,
in the following activities, up to five percent of the bank holding
company's total consolidated capital stock and surplus, without
additional Board or Reserve Bank approval:
{{2-28-06 p.6110.28-L-19}}
(1) Invest in and provide financing to a corporation or project
or class of corporations or projects that the Board previously has
determined is a public welfare project pursuant to paragraph 23 of
section 9 of the Federal Reserve Act (12 U.S.C. 338a);
(2) Invest in and provide financing to a corporation or project
that the Office of the Comptroller of the Currency previously has
determined, by order or regulation, is a public welfare investment
pursuant to section 5136 of the Revised Statutes (12 U.S.C. 24
(Eleventh));
(3) Invest in and provide financing to a community development
financial institution pursuant to section 103(5) of the Community
Development Banking and Financial Institutions Act of 1994
(12 U.S.C. 4702(5));
(4) Invest in, provide financing to, develop, rehabilitate,
manage, sell, and rent residential property if a majority of the units
will be occupied by low- and moderate-income persons or if the property
is a "qualified low-income building" as defined in section
42(c)(2) of the Internal Revenue Code (26 U.S.C. 42(c)(2));
(5) Invest in, provide financing to, develop, rehabilitate,
manage, sell, and rent nonresidential real property or other assets
located in a low- or moderate-income area provided the property is used
primarily for low- and moderate-income persons;
(6) Invest in and provide financing to one or more small
businesses located in a low- and moderate-income area to stimulate
economic development;
(7) Invest in, provide financing to, develop, and otherwise
assist job training or placement facilities or programs designed
primarily for low- and moderate-income persons;
(8) Invest in and provide financing to an entity located in a
low- and moderate-income area if that entity creates long-term
employment opportunities, a majority of which (based on full time
equivalent positions) will be held by low- and moderate-income persons;
and
(9) Provide technical assistance, credit counseling, research,
and program development assistance to low- and moderate-income persons,
small businesses, or nonprofit corporations to help achieve community
development.
(g) For purposes of paragraph (f) of this section, low- and
moderate-income persons or areas means individuals and communities
whose incomes do not exceed 80 percent of the median income of the area
involved, as determined by the U.S. Department of Housing and Urban
Development. Small businesses are businesses that are smaller than the
maximum size eligibility standards established by the Small Business
Administration (SBA) for the Small Business Investment Company and
Development Company Programs or the SBA section 7A loan program; and
specifically include those businesses that are majority-owned by
members of minority groups or by women.
(h) For purposes of paragraph (f) of this section, five percent of
the total consolidated capital stock and surplus of a bank holding
company includes its total investment in projects described in
paragraph (f) of this section, when aggregated with similar types of
investments made by depository institutions controlled by the bank
holding company. The term total consolidated capital stock and surplus
of the bank holding company means total equity capital and the
allowance for loan and lease losses. For bank holding companies that
file the FR Y--9C (Consolidated Financial Statements for Bank Holding
Companies), these items are readily ascertained from Schedule
HC--Consolidated Balance Sheet (total equity capital (line 27h) and
allowance for loan and lease losses (line 4b)). For bank holding
companies filing the FR Y--SP (Parent Company Only Financial Statements
for Small Bank Holding Companies), an approximation of these items is
ascertained from the Balance Sheet (total equity capital (line 16e))
and allowance for loan and lease losses (line 3b)) and from the Report
of Condition for Insured Banks (Schedule RC--Balance Sheet (line 4b)).
[Codified to 12 C.F.R. § 225.127]
[Source: 37 Fed. Reg. 11316, June 7, 1972; 37 Fed. Reg.
13336, July 7, 1972; as amended at 59 Fed. Reg. 63713, December 9,
1994, effective January 9, 1995]
{{2-28-06 p.6110.28-L-20}}
§ 225.129 Activities closely related to banking.
Courier activities. The Board's amendment of
§ 225.4(a), which adds
courier services to the list of closely related activities is intended
to permit holding companies to transport time critical materials of
limited intrinsic value of the types utilized by banks and bank-related
firms in performing their business activities. Such transportation
activities are of particular importance in the check clearing process
of the banking system, but are also important to the performance of
other activities, including the processing of financially related
economic data. The authority is not intended to permit holding
companies to engage generally in the provision of transportation
services.
During the course of the Board's proceedings pertaining to courier
services, objections were made that courier activities were not a
proper incident to banking because of the possibility that holding
companies would or had engaged in unfair competitive practices. The
Board believes that adherence to the following principles will
eliminate or reduce to an insignificant degree any possibility of
unfair competition:
a. A holding company courier subsidiary established under
§ 4(c)(8) should be a
separate, independent corporate entity, not merely a servicing arm of a
bank.
b. As such, the subsidiary should exist as a separate,
profit-oriented operation and should not be subsidized by the holding
company system.
c. Services performed should be explicitly priced, and shall not be
paid for indirectly, for example, on the basis of deposits maintained
at or loan arrangements with affiliated banks.
Accordingly, entry of holding companies into courier activities on
the basis of section 4(c)(8) will be conditioned as follows:
1. The courier subsidiary shall perform services on an
explicit fee basis and shall be structured as an individual profit
center designed to be operated on a profitable basis. The Board
may regard operating losses sustained over an extended period as being
inconsistent with continued authority to engage in courier activities.
2. Courier services performed on behalf of an affiliate's
customer (such as the carriage of incoming cash letters) shall be paid
for by the customer. Such payments shall not be made indirectly, for
example, on the basis of imputed earnings on deposits maintained at or
of loan arrangements with subsidiaries of the holding company.
Concern has also been expressed that bank-affiliated courier
services will be utilized to gain a competitive advantage over firms
competing with other holding company affiliates. To reduce the
possibility that courier affiliates might be so employed, the Board
will impose the following third condition:
3. The courier subsidiary shall, when requested by any bank
or any data processing firm providing financially-related data
processing services which firm competes with a banking or data
processing subsidiary of Applicant, furnish comparable service at
comparable rates, unless compliance with such request would be beyond
the courier subsidiary's practical capacity. In this regard, the
courier subsidiary should make known to the public its minimum rate
schedule for services and its general pricing policies thereto. The
courier subsidiary is also expected to maintain for a reasonable period
of time (not less than two years) each request denied with the reasons
for such denial.
[Codified to 12 C.F.R. § 225.129]
[Source: 38 Fed. Reg. 32126, November 21, 1973, effective November
15, 1973, as amended at 40 Fed. Reg. 36309, August 20,
1975]
§ 225.130 Issuance and sale of short-term debt obligations by
bank holding companies.
For text of interpretation, see § 250.221 of this chapter.
[Codified to 12 C.F.R. § 225.130]
[Source: 38 Fed. Reg. 35231, December 26,
1973]
{{2-28-06 p.6110.28-L-21}}
NOTE
Issuance and sale of short-term debt obligations by bank holding
companies. Section 250.221 (12 C.F.R. § 250.221),
referred to in section 225.130, reads as follows:
§ 250.221 Issuance and sale of short-term debt obligations by
bank holding companies.
(a) The opinion of the Board of Governors of the Federal Reserve
System has been requested recently with respect to the proposed sale of
"thrift notes" by a bank holding company for the purpose of
supplying capital to its wholly owned nonbanking subsidiaries.
(b) The thrift notes would bear the name of the holding company,
which in the case presented, was substantially similar to the name of
its affiliated banks. It was proposed that they be issued in
denominations of $50 to $100 and initially be of 12-month or less
maturities. There would be no maximum amount of the issue. Interest
rates would be variable according to money market conditions but would
presumably be at rates somewhat above those permitted by Regulation Q
ceilings. There would be no guarantee or indemnity of the notes by any
of the banks in the holding company system and, if required to do so,
the holding company would place on the face of the notes a negative
representation that the purchase price was not a deposit, nor an
indirect obligation of banks in the holding company system, nor covered
by deposit insurance.
(c) The notes would be generally available for sale to members of
the public, but only at offices of the holding company and its
nonbanking subsidiaries. Although offices of the holding company
may be in the same building or quarters as its banking offices, they
would be physically separated from the banking offices. Sales would be
made only by officers or employees of the holding company and its
nonbanking subsidiaries. Initially, the notes would only be offered in
the State in which the holding company was principally doing business,
thereby complying with the exemption provided by section 3(a)(11) of
the Securities Act of 1933 (15
U.S.C. 77c) for "intra-state" offerings. If it was
decided to offer the notes on an interstate basis, steps would be taken
to register the notes under the Securities Act of 1933.
Funds from the sale of the notes would be used only to supply the
financial needs of the nonbanking subsidiaries of the holding company.
These nonbank subsidiaries are, at present, a small loan company, a
mortgage banking company and a factoring company. In no instance, would
the proceeds from the sale of the notes be used in the bank
subsidiaries of the holding company nor to maintain the availability of
funds in its bank subsidiaries.
(d) The sale of the thrift notes, in the specific manner proposed,
is an activity described in section 20 of the Banking Act of 1933 (12
U.S.C. 377), that is, "the issue, flotation, underwriting, public
sale or distribution * * * of * * * notes, or other securities".
Briefly stated, this statute prohibits a member bank to be affiliated
with a company "engaged principally" in such activity. Since the
continued issuance and sale of such securities would be necessary to
permit maintenance of the holding company's activities without
substantial contraction and would be an integral part of its
operations, the Board concluded that the issuance and sale of such
notes would constitute a principal activity of a holding company within
the spirit and purpose of the statute. (For prior Board decisions in
this connection, see 1934 Federal Reserve Bulletin 485, 12 CFR 218.104,
12 CFR 218.105 and 12 CFR 218.101.)
(e) In reaching this conclusion, the Board distinguished the
proposed activity from the sale of short-term notes commonly known as
"commercial paper", which is a recognized form of financing for
bank holding companies. For purposes of this interpretation,
"commercial paper" may be defined as notes, with maturities not
exceeding nine months, the proceeds of which are to be used for current
transactions, which are usually sold to sophisticated institutional
investors, rather than to members of the general public, in
minimum denominations of $10,000 (although sometimes they may be sold
in minimum denominations of $5,000). Commercial paper is exempt
from registration under the Securities Act of 1933 by reason of
the exemption provided by section 3(a)(3) thereof (15 U.S.C.
77c). That exemption is inapplicable where the securities are
sold
{{2-28-06 p.6110.28-L-22}}to the general
public (17 CFR 231.4412). The reasons for such exemption, taken
together with the abuses that gave rise to the passage of the Banking
Act of 1933 ("the Glass-Steagall Act") have led the Board to
conclude that the issuance of commercial paper by a bank holding
company is not an activity intended to be included within the scope of
section 20.
§ 225.131 Activities closely related to
banking.
(a) Bank management consulting advice. The Board's
amendment of § 225.4(a),
which adds bank management consulting advice to the list of closely
related activities, describes in general terms the nature of such
activity. This interpretation is intended to explain in greater detail
certain of the terms in the amendment.
(b) It is expected that bank management consulting advice would
include, but not be limited to, advice concerning: bank operations,
systems and procedures; computer operations and mechanization;
implementation of electronic funds transfer systems; site planning and
evaluation; bank mergers and the establishment of new branches;
operation and management of a trust department; international banking;
foreign exchange transactions; purchasing policies and practices; cost
analysis, capital adequacy and planning; auditing; accounting
procedures; tax planning; investment advice (as authorized in
§ 225.4(a)(5)); credit policies and administration, including credit
documentation, evaluation, and debt collection; product development,
including specialized lending provisions; marketing operations,
including research, market development and advertising programs;
personnel operations, including recruiting, training, evaluation and
compensation; and security measures and procedures.
(c) In permitting bank holding companies to provide management
consulting advice to nonaffiliated "banks", the Board intends
such advice to be given only to an institution that both accepts
deposits that the depositor has a legal right to withdraw on demand and
engages in the business of making commercial loans. It is also intended
that such management consulting advice may be provided to the
"operations subsidiaries" of a bank, since such subsidiaries
perform functions that a bank is empowered to perform directly at
locations at which the bank is authorized to engage in business
(§ 250.141 of this chapter).
(d) Although a bank holding company providing management consulting
advice is prohibited by the regulation from owning or controlling,
directly or indirectly, any equity securities in a client bank, this
limitation does not apply to shares of a client bank acquired, directly
or indirectly, as a result of a default on a debt previously
contracted. This limitation is also inapplicable to shares of a client
bank acquired by a bank holding company, directly or indirectly, in a
fiduciary capacity; Provided, That the bank holding company
or its subsidiary does not have sole discretionary authority to vote
such shares or shares held with sole voting rights constitute not more
than five percent of the outstanding voting shares of a client bank.
[Codified to 12 C.F.R. § 225.131]
[Source: 39 Fed. Reg. 8318, March 5, 1974, effective February 26,
1974; 39 Fed. Reg. 21120, June 19,
1974]
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