February 17, 1989
TO: BOARD OF GOVERNORS NO. 13-89
CLOSED-END FUND MEMBERS NO. 12-89
SEC RULES MEMBERS NO. 14-89
UNIT INVESTMENT TRUST MEMBERS NO. 16-89
RE: RECENT ACTIONS OF FEDERAL BANK REGULATORS
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The Comptroller of the Currency has issued a circular
concerning the acceptance of financial benefits by bank trust
departments. The circular (a copy of which is attached) was
issued in response to the acceptance by trust departments of
national banks of financial incentives (including discounts on
other products, computer goods and services and travel expenses)
from investment management firms in exchange for the investment
of fiduciary assets in funds offered by those firms. The purpose
of the circular is to remind national banks that such practices
are prohibited by law.
In a separate banking regulatory matter of interest to
investment companies, the Federal Reserve Board has announced
an interpretation under Regulation H that permits state member
banks to purchase shares of investment companies that invest
solely in instruments that such banks may purchase directly.
This interpretation grants state member banks authority parallel
to that of national banks. A copy of the interpretation of the
Board is attached.
Craig S. Tyle
Assistant General Counsel
Attachment