4000 - Advisory Opinions
Bank Subsidiary Engaged Only in Securities Activities Permissible for the Bank Itself Under Glass Steagall Act Is Not Required to Meet Definition of a Bona Fide Subsidiary
January 21, 1986
Pamela E. F. LeCren, Senior Attorney
I have reviewed your January 3, 1986 letter describing the steps *** plans to take with respect to its Financial Management Account ("FMA") (the account "combines traditional banking activities . . . with other services, including discount brokerage") in order to comply with Securities and Exchange Commission Rule 3(b)(9). I concur in your reading of section 337.4 of the FDIC's regulations that a subsidiary of a bank whose only securities activities are ones that are permissible for the bank itself under the Glass-Steagall Act is not required to meet the definition of a bona fide subsidiary. As your letter indicates, however, if the subsidiary expands its activities into areas that are covered by the Glass-Steagall Act, the subsidiary will have to meet those requirements. In addition, the appropriate FDIC regional office must be given notice of the expansion of the activities within 30 days after the new activities are undertaken.
Your letter also outlined steps which the bank is prepared to take in way of disclosure by, and office location of, the subsidiary which will offer the brokerage services. We will not comment thereon other than to indicate that the FDIC does have a general concern that such a subsidiary conduct business in a way that avoids public confusion as to the insured status of the investments handled by the subsidiary. The FDIC, however, does not presently have any regulations, guidelines, or policy statements which set forth specific requirements to that end.