March 10, 1994
TO: BOARD OF GOVERNORS NO. 24-94
FEDERAL LEGISLATION COMMITTEE NO. 5-94
FEDERAL LEGISLATION MEMBERS NO. 5-94
BANK ISSUES GROUP
RE: DINGELL HOLDS DREYFUS/MELLON HEARINGS
__________________________________________________________
On March 2 and 3, House Energy and Commerce Committee Chairman John Dingell
(D-MI) held hearings on the proposed merger between Mellon Bank and Dreyfus
Corporation. The hearings were held by the Oversight and Investigation
Subcommittee.
SEC Chairman Arthur Levitt testified that his agency should be given
greater authority to oversee bank mutual fund activities and supported H.R. 3447,
the Dingell so-called functional regulation legislation. Chairman Levitt noted
that the SEC has been given the responsibility of protecting investors, a role
not shared by bank regulators, who are primarily concerned with bank safety and
soundness. To pursue the issue of customer confusion, the Subcommittee also
heard from prosecutors and others involved in the Lincoln Savings and Loan
scandal, in which investors believed that securities they purchased at the thrift
were federally insured.
Eugene Ludwig, Comptroller of the Currency, and officials from Mellon and
Dreyfus also testified. In the intensive exchanges, Chairman Dingell expressed
his doubts that the OCC was properly equipped to handle issues which are raised
by banks selling mutual funds.
Dreyfus and Mellon officials gave a summary of voluntary, investor
protections measure they are undertaking to minimize customer confusion about
which products are federally insured. These include not using the Mellon Bank
name or logo in conjunction with any mutual fund product, extensive disclosure
documentation, and sales through SEC-registered broker-dealers.
Additional Subcommittee inquiries continue, but no further hearings are
currently scheduled.
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Copies of testimony presented by the Comptroller, Mellon and Dreyfus are
enclosed.
We will keep you informed of further developments. If you wish additional
information, please call the Legislative Affairs Department at 202/326-5890.
This memo can also be found in FUNDS, the Institute's Fund
User Network and Delivery System, under Legislative Affairs; Washington Update.
Julie Domenick
Senior Vice President
Legislative Affairs