April 19, 1991
TO: FEDERAL LEGISLATION MEMBERS NO. 4-91
RE: INSTITUTE TESTIMONY ON FINANCIAL SERVICES RESTRUCTURING
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On April 18, the Institute testified before the Financial
Institutions Supervision, Regulation and Insurance Subcommittee
of the House Committee on Banking, Finance and Urban Affairs on
the Administration's bill to restructure the financial services
industry.
In its testimony, the Institute expressed its general
support of the Administration's comprehensive approach to
restructuring and endorsed certain aspects of the bill:
(1) A two-way competitive street, under which all banks
can affiliate with securities firms and all securities firms can
affiliate with banks.
(2) Repeal of the restrictions of interstate banking in
order to permit securities firms affiliated with banks to offer
securities and banking products on a nationwide basis.
(3) A requirement that banking activities and securities
activities be conducted by separate subsidiaries of holding
companies.
(4) A requirement that securities activities conducted by
these securities subsidiaries (including mutual fund activities)
be subject to full SEC regulation under the federal securities
laws.
(5) A closure of the loophole that would let the Office of
the Comptroller essentially turn bank collective investment funds
into mutual funds without subjecting them to the same regulation
as mutual funds.
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The Institute took the opportunity to offer additional
suggestions to strengthen and expand the bill's investor
protection and firewall provisions. Specifically, the Institute
recommended that prohibitions be added to certain types of
conflict of interest transactions that can arise when a bank
affiliate acts as sponsor or adviser to a fund; it also pointed
out that protections should be added to prevent investor
confusion and other problems that can result from the marketing
of funds to the public by affiliates of insured depository
institutions. The Institute also expressed support for
subjecting all pooled investment funds to SEC regulation.
A copy of the Institute's testimony is attached. Please
call if you wish further information. We will keep you informed
of further developments.
This memo can also be found on FUNDS, the Institute's Fund
User Network and Delivery Systems, under Legislative Affairs,
Washington Update.
Julie Domenick
Vice President
Legislative Affairs