January 19, 1989
TO: BOARD OF GOVERNORS NO. 5-89
CLOSED-END FUND COMMITTEE NO. 1-89
SEC RULES COMMITTEE NO. 5-89
UNIT INVESTMENT TRUST COMMITTEE NO. 2-89
RE: FED APPLICATIONS TO UNDERWRITE AND DEAL IN DEBT AND EQUITY
SECURITIES
__________________________________________________________
As we previously informed you, five bank holding companies
filed applications last fall to engage in underwriting and
dealing in certain debt and/or equity securities. (See
Memorandum to Board of Governors No. 74-88, SEC Rules Committee
No. 70-88, Closed-End Fund Committee No. 29-88 and Unit
Investment Trust Committee No. 33-88, dated November 17, 1988.)
On January 18, the Federal Reserve Board announced that it had
conditionally approved the applications. The authorization to
underwrite and deal in debt securities is effective immediately
upon satisfaction of the conditions in the approval; however,
authorization to underwrite and deal in equity securities will be
delayed until the Board determines that the applicants have
established proper managerial and operational infrastructure.
The Board will make this finding based on a review in one year.
The approval does not extend to shares of mutual funds.
The approval does, however, permit the applicants to underwrite
and deal in shares of unaffiliated closed-end funds and unit
investment trusts. Under Regulation Y, a bank holding company
would remain prohibited from purchasing for its own account, or
engaging in the sale or distribution of, securities of any
investment company that it sponsors or advises.
The approval is conditioned upon various structural and
operating limitations, including a prohibition of distribution of
prospectuses and sales literature by an affiliated bank or
thrift.
We will keep you informed of developments.
Craig S. Tyle
Assistant General Counsel