April 30, 1993
TO: BOARD OF GOVERNORS NO. 38-93
BANK INVESTMENT MANAGEMENT MEMBERS NO. 7-93
RE: OCC LETTER ON COMMON BANK-MUTUAL FUND NAMES
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The Comptroller of the Currency recently released the
attached interpretive letter concerning the use of a national
bank's name by the bank's proprietary mutual funds. In the
letter, the OCC expressed concern that "some customers may
believe that the [mutual funds] are backed by the Bank or are
insured deposits." The letter also noted that the bank could
incur liability under the federal securities laws if customers
are so misled. The OCC suggested that the bank consider
alternative names that might avoid this confusion.
The letter also expressed the OCC's concerns with possible
conflicts of interest that could arise from the bank's management
of the mutual funds. In particular, the OCC reiterated that its
regulations would prohibit an operating subsidiary from both
advising the funds and managing trust assets that are placed in
the funds, unless authorized by the trust instrument, court
order, or local law. The letter also expressed concern about
possible conflicts if the operating subsidiary manages the bank's
investment portfolio, although the letter indicated that the bank
is developing policies to control such conflicts.
As we previously informed you, Energy and Commerce
Chairman John Dingell recently requested that the OCC, the
Securities and Exchange Commission, the Federal Reserve Board,
the Federal Deposit Insurance Corporation, and the Office of
Thrift Supervision furnish information concerning the use of bank
names by bank-managed mutual funds. (See Memorandum to Board of
Governors No. 25-93 and Bank Investment Management Members No. 3-
93.) We will send you the replies of these agencies when they
are available.
Thomas M. Selman
Assistant Counsel
Attachment