Joint Interim Rule and Request for Public Comment Regarding Merchant Banking Investments - District

Federal Reserve Bank Of Dallas

Informations

• Publié par: Obba
• Nombre de lectures: 32
• Langue: English

Extrait

Federal Reserve Bank
ll★K
of Dallas
DALLAS, TEXASMay 5, 2000
75265-5906
Notice 2000-28
TO: The Chief Executive Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District
SUBJECT
Joint Interim Rule and
Request for Public Comment Regarding
Merchant Banking Investments
DETAILS
The Board of Governors of the Federal Reserve System and the Secretary of the
Treasury have jointly adopted on an interim basis a rule that will govern merchant banking
investments made by financial holding companies. The rule, which became effective March 17,
2000, implements provisions of the recently enacted Gramm-Leach-Bliley Act that permit
financial holding companies to make investments as part of a bona fide securities underwriting or
merchant or investment banking activity.
Also, the Board and the Treasury have requested public comment on the interim rule.
Comments must be received by May 22, 2000. Please address comments to Jennifer J. Johnson,
Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution
Avenue, N.W., Washington, DC 20551. Also, you may mail comments electronically to
[e-mail]. All comments should refer to Docket No. R-1065.
AT TACHMENT
A copy of the Board’s notice as it appears on pages 16460–79, Vol. 65, No. 60 of the
Federal Register dated March 28, 2000, is attached.
MORE INFORMATION
For more information, please contact Rob Jolley, Banking Supervision Department,
at [phone]. For additional copies of this Bank’s notice, contact the Public Affairs
Department at [phone] or access District Notices on our web site at
http://www.dallasfed.org/banking/notices/index.html.
For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office [phone]; El Paso Branch Intrastate [phone], Interstate [phone];
Houston Branch Intrastate [phone], Interstate [phone]; San Antonio Branch Intrastate [phone].Tuesday,
March 28, 2000
Part II
Federal Reserve
System
Department of the
Treasury
12 CFR Parts 225 and 1500
Bank Holding Companies and Change in
Bank Control; Interim Rule and Proposed
Rule
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Constitution Avenue and C Street, N.W. financial holding companies to makeFEDERAL RESERVE SYSTEM
Members of the public may inspect merchant banking investments is an
12 CFR Part 225 comments in Room MP–500 of the alternative to any other authority that
Martin Building between 9:00 a.m. and the financial holding company may
[Regulation Y; Docket No. R–1065]
5:00 p.m. on weekdays. Comments have to make investments in
addressed to the Treasury Department nonfinancial companies under otherDEPARTMENT OF THE TREASURY
may also be delivered to the Treasury provisions of the Bank Holding
Department mail room between the Company Act except as specificallyOffice of the Under Secretary for
hours of 8:45 a.m. and 5:15 p.m. at the noted in the rule.Domestic Finance
15th Street entrance to the Treasury The interim rule sets forth the
Building. parameters within which financial12 CFR Part 1500
holding companies may make merchantFOR FURTHER INFORMATION CONTACT:RIN 1505–AA78
banking investments. As an initialBoard of Governors: Scott G. Alvarez,
matter, the GLB Act allows a financialAssociate General Counsel (202/452–Bank Holding Companies and Change
holding company to make merchant3583), Kieran J. Fallon, Senior Counselin Bank Control
banking investments if the financial(202/452–5270), or Camille M. Caesar,
AGENCIES: Board of Governors of the holding company controls a securitiesSenior Attorney (202/452–3513), Legal
Federal Reserve System and Department affiliate or controls both an insuranceDivision; Jean Nellie Liang, Chief,
of the Treasury. underwriter and a registered investmentCapital Markets (202/452–2918),
adviser. The rule defines a securitiesACTION: Interim rule, with request for Division of Research & Statistics;
affiliate for this purpose to be anypublic comments. Michael G. Martinson, Deputy Associate
registered securities broker or dealer.Director (202/452–3640) or James A.
SUMMARY: The Board of Governors of the The GLB Act contains provisions thatEmbersit, Manager, Capital Markets
Federal Reserve System and the are designed to help maintain the(202/452–5249), Division of Banking
Secretary of the Treasury jointly adopt separation between banking andSupervision and Regulation; Board of
on an interim basis, effective March 17, commerce by limiting the time periodGovernors of the Federal Reserve
2000, and solicit comment on a rule that that a merchant banking investmentSystem, 20th Street and Constitution
will govern merchant banking may be held by a financial holdingAvenue, N.W., Washington, D.C. 20551.
investments made by financial holding company and the circumstances underUsers of Telecommunications Device for
companies. This rule implements which the financial holding companythe Deaf (TDD) only contact Janice
provisions of the recently enacted may routinely manage or operate aSimms at (202) 872–4984.
Gramm-Leach-Bliley Act (GLB Act) that portfolio company. In particular, theDepartment of the Treasury: Joan
permit financial holding companies to GLB Act provides that merchantAffleck-Smith, Director, Office of
make investments as part of a bona fide banking investments may be held onlyFinancial Institutions Policy (202/622–
securities underwriting or merchant or for a period of time that enables the sale2740), Gerry Hughes, Senior Financial
investment banking activity. A summary or disposition of the investment on aEconomist (202/622–2740); Roberta K.
of the rule appears below in the reasonable basis consistent with theMcInerney, Assistant General Counsel
executive summary in the financial viability of merchant banking(Banking and Finance) (202/622–0480)
SUPPLEMENTARY INFORMATION section. investment activities. The rule providesor Gary Sutton, Senior Banking Counsel
DATES: The interim rule is effective on that, in most cases, merchant banking(202/622–0480).
March 17, 2000. Comments must be investments may be held for a 10-yearSUPPLEMENTARY INFORMATION:
received on both the interim rule and period. The rule allows a financial
A. Executive Summarythe capital proposal by May 22, 2000. holding company to invest in a
ADDRESSES: Comments should refer to qualifying private equity fund for theThis rule implements provisions of
docket number R–1065 and should be term of the fund, up to 15 years underthe recently enacted GLB Act that
sent to Ms. Jennifer J. Johnson, certain circumstances.permit financial holding companies to
Secretary, Board of Governors of the With respect to routinely managing ormake investments as part of a bona fide
Federal Reserve System, 20th Street and operating portfolio companies, the rulesecurities underwriting or merchant or
Constitution Avenue, N.W., clarifies that director interlocks at theinvestment banking activity. These
Washington, D.C. 20551 (or mailed portfolio company and certain types ofinvestments may be made in any type of
electronically to agreements and covenants that affectownership interest in any type of
[e-mail]) and only extraordinary corporate eventsnonfinancial entity (portfolio company),
to Merchant Banking Regulation, Office would not, as a general matter, beand may include any amount up to all
of Financial Institution Policy, U.S. considered routine management orof the ownership interests in the
Department of the Treasury, 1500 operation. The rule also provides that acompany. The investments that may be
Pennsylvania Avenue, N.W., Room SC financial holding company would bemade under this new authority are
37, Washington, D.C. 20220 (or mailed considered to be routinely managing orsubstantially broader in scope than the
electronically to operating a portfolio company if theinvestment activities otherwise
[e-mail]). financial holding company establishespermissible for bank holding
Comments addressed to Ms. Johnson interlocks at the officer or employeecompanies, and are referred to as
also may be delivered to the Board’s level of the portfolio company or has‘‘merchant banking investments.’’
mail room between the hours of 8:45 The interim rule does not address or certain other arrangements involving
a.m. and 5:15 p.m. and, outside of those apply to securities underwriting, day-to-day management or participation
hours, to the Board’s security control dealing or market making activities in ordinary business decisions. The rule
room. Both the mail room and the conducted under section 4(k)(4)(E) of sets forth those limited circumstances
security control room are accessible the Bank Holding Company Act (BHC when it is permissible for a financial
from the Eccles Building courtyard Act). Moreover, the authority granted by holding company to routinely manage
entrance, located on 20th Street between section 4(k)(4)(H) of the BHC Act to or operate a portfolio company, requires
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