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7500 - FRB Regulations


Subpart J—Merchant Banking Investments

§ 225.170  What type of investments are permitted by this subpart, and under what conditions may they be made?

(a)  What types of investments are permitted by this subpart?  Section 4(k)(4)(H) of the Bank Holding Company Act (12 U.S.C. 1843(k)(4)(H)) and this subpart authorize a financial holding company, directly or indirectly and as principal or on behalf of one or more persons, to acquire or control any amount of shares, assets or ownership interests of a company or other entity that is engaged in any activity not otherwise authorized for the financial holding company under section 4 of the Bank Holding Company Act. For purposes of this subpart, shares, assets or ownership interests acquired or controlled under section 4(k)(4)(H) and this subpart are referred to as "merchant banking investments." A financial holding company may not directly or indirectly acquire or control any merchant banking investment except in compliance with the requirements of this subpart.

(b)  Must the investment be a bona fide merchant banking investment?  The acquisition or control of shares, assets or ownership interests under this subpart is not permitted unless it is part of a bona fide underwriting or merchant or investment banking activity.

(c)  What types of ownership interests may be acquired?  Shares, assets or ownership interests of a company or other entity include any debt or equity security, warrant, option, partnership interest, trust certificate or other instrument representing an ownership interest in the company or entity, whether voting or nonvoting.

(d)  Where in a financial holding company may merchant banking investments be made?  A financial holding company and any subsidiary (other than a depository institution or subsidiary of a depository institution) may acquire or control merchant banking investments. A financial holding company and its subsidiaries may not acquire or control merchant banking investments on behalf of a depository institution or subsidiary of a depository institution.

(e)  May assets other than shares be held directly?  A financial holding company may not under this subpart acquire or control assets, other than debt or equity securities or other ownership interests in a company, unless:

(1)  The assets are held by or promptly transferred to a portfolio company;

(2)  The portfolio company maintains policies, books and records, accounts, and other indicia of corporate, partnership or limited liability organization and operation that are separate from the financial holding company and limit the legal liability of the financial holding company for obligations of the portfolio company; and

(3)  The portfolio company has management that is separate from the financial holding company to the extent required by § 225.171.

(f)  What type of affiliate is required for a financial holding company to make merchant banking investments?  A financial holding company may not acquire or control merchant banking investments under this subpart unless the financial holding company qualifies under at least one of the following paragraphs:

(1)  Securities affiliate.  The financial holding company is or has an affiliate that is registered under the Securities Exchange Act of 1934 (15 U.S.C. 78c, 78o, 78o--4) as:

(i)  A broker or dealer; or

(ii)  A municipal securities dealer, including a separately identifiable department or division of a bank that is registered as a municipal securities dealer.

(2)  Insurance affiliate with an investment adviser affiliate.  The financial holding company controls:

(i)  An insurance company that is predominantly engaged in underwriting life, accident and health, or property and casualty insurance (other than credit-related insurance), or providing and issuing annuities; and

(ii)  A company that:

(A)  Is registered with the Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940 (15 U.S.C. 80b--1 et seq.); and

(B)  Provides investment advice to an insurance company.

[Codified to 12 C.F.R. § 225.170]

[Section 225.170 added at 65 Fed. Reg. 16473, March 28, 2000, effective March 17, 2000; amended at 66 Fed. Reg. 8484, January 31, 2001, effective February 15, 2001]

§ 225.171  What are the limitations on managing or operating a portfolio company held as a merchant banking investment?

(a)  May a financial holding company routinely manage or operate a portfolio company?  Except as permitted in paragraph (e) of this section, a financial holding company may not routinely manage or operate any portfolio company.

(b)  When does a financial holding company routinely manage or operate a company?

(1)  Examples of routine management or operation.--(i)  Executive officer interlocks at the portfolio company.  A financial holding company routinely manages or operates a portfolio company if any director, officer or employee of the financial holding company serves as or has the responsibilities of an executive officer of the portfolio company.

(ii)  Interlocks by executive officers of the financial holding company.--

(A)  Prohibition.  A financial holding company routinely manages or operates a portfolio company if any executive officer of the financial holding company serves as or has the responsibilities of an officer or employee of the portfolio company.

(B)  Definition.  For purposes of paragraph (b)(1)(ii)(A) of this section, the term "financial holding company" includes the financial holding company and only the following subsidiaries of the financial holding company:

(1)  A securities broker or dealer registered under the Securities Exchange Act of 1934;

(2)  A depository institution;

(3)  An affiliate that engages in merchant banking activities under this subpart or insurance company investment activities under section 4(k)(4)(I) of the Bank Holding Company Act (12 U.S.C. 1843(k)(4)(I));

(4)  A small business investment company (as defined in section 302(b) of the Small Business Investment Act of 1958 (15 U.S.C. 682(b)) controlled by the financial holding company or by any depository institution controlled by the financial holding company; and

(5)  Any other affiliate that engages in significant equity investment activities that are subject to a special capital charge under the capital adequacy rules or guidelines of the Board.

(iii)  Covenants regarding ordinary course of business.  A financial holding company routinely manages or operates a portfolio company if any covenant or other contractual arrangement exists between the financial holding company and the portfolio company that would restrict the portfolio company's ability to make routine business decisions, such as entering into transactions in the ordinary course of business or hiring officers or employees other than executive officers.

(2)  Presumptions of routine management or operation.  A financial holding company is presumed to routinely manage or operate a portfolio company if:

(i)  Any director, officer, or employee of the financial holding company serves as or has the responsibilities of an officer (other than an executive officer) or employee of the portfolio company; or

(ii)  Any officer or employee of the portfolio company is supervised by any director, officer, or employee of the financial holding company (other than in that individual's capacity as a director of the portfolio company).

(c)  How may a financial holding company rebut a presumption that it is routinely managing or operating a portfolio company?  A financial holding company may rebut a presumption that it is routinely managing or operating a portfolio company under paragraph (b)(2) of this section by presenting information to the Board demonstrating to the Board's satisfaction that the financial holding company is not routinely managing or operating the portfolio company.

(d)  What arrangements do not involve routinely managing or operating a portfolio company?--(1)  Director representation at portfolio companies.  A financial holding company may select any or all of the directors of a portfolio company or have one or more of its directors, officers, or employees serve as directors of a portfolio company if:

(i)  The portfolio company employs officers and employees responsible for routinely managing and operating the company; and

(ii)  The financial holding company does not routinely manage or operate the portfolio company, except as permitted in paragraph (e) of this section.

(2)  Covenants or other provisions regarding extraordinary events.  A financial holding company may, by virtue of covenants or other written agreements with a portfolio company, restrict the ability of the portfolio company, or require the portfolio company to consult with or obtain the approval of the financial holding company, to take actions outside of the ordinary course of the business of the portfolio company. Examples of the types of actions that may be subject to these types of covenants or agreements include, but are not limited to, the following:

(i)  The acquisition of significant assets or control of another company by the portfolio company or any of its subsidiaries;

(ii)  Removal or selection of an independent accountant or auditor or investment banker by the portfolio company;

(iii)  Significant changes to the business plan or accounting methods or policies of the portfolio company;

(iv)  Removal or replacement of any or all of the executive officers of the portfolio company;

(v)  The redemption, authorization or issuance of any equity or debt securities (including options, warrants or convertible shares) of the portfolio company or any borrowing by the portfolio company outside of the ordinary course of business;

(vi)  The amendment of the articles of incorporation or by-laws (or similar government documents) of the portfolio company; and

(vii)  The sale, merger, consolidation, spin-off, recapitalization, liquidation, dissolution or sale of substantially all of the assets of the portfolio company or any of its significant subsidiaries.

(3)  Providing advisory and underwriting services to, and having consultations with, a portfolio company.  A financial holding company may:

(i)  Provide financial, investment and management consulting advice to a portfolio company in a manner consistent with and subject to any restrictions on such activities contained in §§ 225.28(b)(6) or 225.86(b)(1) of this part (12 CFR 225.28(b)(6) and 225.86(b)(1));

(ii)  Provide assistance to a portfolio company in connection with the underwriting or private placement of its securities, including acting as the underwriter or placement agent for such securities; and

(iii)  Meet with the officers or employees of a portfolio company to monitor or provide advice with respect to the portfolio company's performance or activities.

(e)  When may a financial holding company routinely manage or operate a portfolio company?--(1)  Special circumstances required.  A financial holding company may routinely manage or operate a portfolio company only when intervention by the financial holding company is necessary or required to obtain a reasonable return on the financial holding company's investment in the portfolio company upon resale or other disposition of the investment, such as to avoid or address a significant operating loss or in connection with a loss of senior management at the portfolio company.

(2)  Duration Limited.  A financial holding company may routinely manage or operate a portfolio company only for the period of time as may be necessary to address the cause of the financial holding company's involvement, to obtain suitable alternative management arrangements, to dispose of the investment, or to otherwise obtain a reasonable return upon the resale or disposition of the investment.

(3)  Notice required for extended involvement.  A financial holding company may not routinely manage or operate a portfolio company for a period greater than nine months without prior written notice to the Board.

(4)  Documentation required.  A financial holding company must maintain and make available to the Board upon request a written record describing its involvement in routinely managing or operating a portfolio company.

(f)  May a depository institution or its subsidiary routinely manage or operate a portfolio company?--(1)  In general.  A depository institution and a subsidiary of a depository institution may not routinely manage or operate a portfolio company in which an affiliated company owns or controls an interest under this subpart.

(2)  Definition applying provisions governing routine management or operation.  For purposes of this section other than paragraph (e) and for purposes of § 225.173(d), a financial holding company includes a depository institution controlled by the financial holding company and a subsidiary of such a depository institution.

(3)  Exception for certain subsidiaries of depository institutions.  For purposes of paragraph (e) of this section, a financial holding company includes a financial subsidiary held in accordance with section 5136A of the Revised Statutes (12 U.S.C. 24a) or section 46 of the Federal Deposit Insurance Act (12 U.S.C. 1831w), and a subsidiary that is a small business investment company and that is held in accordance with the Small Business Investment Act (15 U.S.C. 661 et seq.), and such a subsidiary may, in accordance with the limitations set forth in this section, routinely manage or operate a portfolio company in which an affiliated company owns or controls an interest under this subpart.

[Codified to 12 C.F.R. § 225.171]

[Section 225.171 added at 65 Fed. Reg. 16473, March 28, 2000, effective March 17, 2000; amended at 66 Fed. Reg. 8485, January 31, 2001, effective February 15, 2001]

§ 225.172  What are the holding periods permitted for merchant banking investments?

(a)  Must investments be made for resale?  A financial holding company may own or control shares, assets and ownership interests pursuant to this subpart only for a period of time to enable the sale or disposition thereof on a reasonable basis consistent with the financial viability of the financial holding company's merchant banking investment activities.

(b)  What period of time is generally permitted for holding merchant banking investments?--(1)  In general.  Except as provided in this section or § 225.173, a financial holding company may not, directly or indirectly, own, control or hold any share, asset or ownership interest pursuant to this subpart for a period that exceeds 10 years.

(2)  Ownership interests acquired from or transferred to companies held under this subpart.  For purposes of paragraph (b)(1) of this section, shares, assets or ownership interests--

(i)  Acquired by a financial holding company from a company in which the financial holding company held an interest under this subpart will be considered to have been acquired by the financial holding company on the date that the share, asset or ownership interest was acquired by the company; and

(ii)  Acquired by a company from a financial holding company will be considered to have been acquired by the company on the date that the share, asset or ownership interest was acquired by the financial holding company if--

(A)  The financial holding company held the share, asset, or ownership interest under this subpart; and

(B)  The financial holding company holds an interest in the acquiring company under this subpart.

(3)  Interests previously held by a financial holding company under limited authority.  For purposes of paragraph (b)(1) of this section, any shares, assets, or ownership interests previously owned or controlled, directly or indirectly, by a financial holding company under any other provision of the Federal banking laws that imposes a limited holding period will if acquired under this subpart be considered to have been acquired by the financial holding company under this subpart on the date the financial holding company first acquired ownership or control of the shares, assets or ownership interests under such other provision of law. For purposes of this paragraph (b)(3), a financial holding company includes a depository institution controlled by the financial holding company and any subsidiary of such a depository institution.

(4)  Approval required to hold interests held in excess of time limit.  A financial holding company may seek Board approval to own, control or hold shares, assets or ownership interests of a company under this subpart for a period that exceeds the period specified in paragraph (b)(1) of this section. A request for approval must:

(i)  Be submitted to the Board at least 90 days prior to the expiration of the applicable time period;

(ii)  Provide the reasons for the request, including information that addresses the factors in paragraph (b)(5) of this section; and

(iii)  Explain the financial holding company's plan for divesting the shares, assets or ownership interests.

(5)  Factors governing Board determinations.  In reviewing any proposal under paragraph (b)(4) of this section, the Board may consider all the facts and circumstances related to the investment, including:

(i)  The cost to the financial holding company of disposing of the investment within the applicable period;

(ii)  The total exposure of the financial holding company to the company and the risks that disposing of the investment may pose to the financial holding company;

(iii)  Market conditions;

(iv)  The nature of the portfolio company's business;

(v)  The extent and history of involvement by the financial holding company in the management and operations of the company; and

(vi)  The average holding period of the financial holding company's merchant banking investments.

(6)  Restrictions applicable to investments held beyond time period.  A financial holding company that directly or indirectly owns, controls or holds any share, asset or ownership interest of a company under this subpart for a total period that exceeds the period specified in paragraph (b)(1) of this section must--

(i)  For purposes of determining the financial holding company's regulatory capital, apply to the financial holding company's adjusted carrying value of such shares, assets, or ownership interests a capital charge determined by the Board that must be:

(A)  Higher than the maximum marginal tier 1 capital charge applicable under part 217 to merchant banking investments held by that financial holding company;1 and

(B)  In no event less than 25 percent of the adjusted carrying value of the investment; and

(ii)  Abide by any other restrictions that the Board may impose in connection with granting approval under paragraph (b)(4) of this section.

[Codified to 12 C.F.R. § 225.172]

[Section 225.172 added at 65 Fed. Reg. 16474, March 28, 2000, effective March 17, 2000; 66 Fed. Reg. 8486, January 31, 2001, effective February 15, 2001; 78 Fed. Reg. 62291, October 11, 2013, effective January 1, 2014]

§ 225.173  How are investments in private equity funds treated under this subpart?

(a)  What is a private equity fund?  For purposes of this subpart, a "private equity fund" is any company that:

(1)  Is formed for the purpose of and is engaged exclusively in the business of investing in shares, assets, and ownership interests of financial and nonfinancial companies for resale or other disposition;

(2)  Is not an operating company;

(3)  No more than 25 percent of the total equity of which is held, owned or controlled, directly or indirectly, by the financial holding company and its directors, officers, employees and principal shareholders;

(4)  Has a maximum term of not more than 15 years; and

(5)  Is not formed or operated for the purpose of making investments inconsistent with the authority granted under section 4(k)(4)(H) of the Bank Holding Company Act (12 U.S.C. 1843(k)(4)(H)) or evading the limitations governing merchant banking investments contained in this subpart.

(b)  What form may a private equity fund take?  A private equity fund may be a corporation, partnership, limited liability company or other type of company that issues ownership interests in any form.

(c)  What is the holding period permitted for interests in private equity funds?

(1)  In general.  A financial holding company may own, control or hold any interest in a private equity fund under this subpart and any interest in a portfolio company that is owned or controlled by a private equity fund in which the financial holding company owns or controls any interest under this subpart for the duration of the fund, up to a maximum of 15 years.

(2)  Request to hold interest for longer period.  A financial holding company may seek Board approval to own, control or hold an interest in or held through a private equity fund for a period longer than the duration of the fund in accordance with § 225.172(b) of this subpart.

(3)  Application of rules.  The rules described in § 225.172(b)(2) and (3) governing holding periods of interests acquired, transferred or previously held by a financial holding company apply to interests in, held through, or acquired from a private equity fund.

(d)  How do the restrictions on routine management and operation apply to private equity funds and investments held through a private equity fund?--(1)  Portfolio companies held through a private equity fund.  A financial holding company may not routinely manage or operate a portfolio company that is owned or controlled by a private equity fund in which the financial holding company owns or controls any interest under this subpart, except as permitted under § 225.171(e).

(2)  Private equity funds controlled by a financial holding company.  A private equity fund that is controlled by a financial holding company may not routinely manage or operate a portfolio company, except as permitted under § 225.171(e).

(3)  Private equity funds that are not controlled by a financial holding company.  A private equity fund may routinely manage or operate a portfolio company so long as no financial holding company controls the private equity fund or as permitted under § 225.171(e).

(4)  When does a financial holding company control a private equity fund?  A financial holding company controls a private equity fund for purposes of this subpart if the financial holding company, including any director, officer, employee or principal shareholder of the financial holding company:

(i)  Serves as a general partner, managing member, or trustee of the private equity fund (or serves in a similar role with respect to the private equity fund);

(ii)  Owns or controls 25 percent or more of any class of voting shares or similar interests in the private equity fund;

(iii)  In any manner selects, controls or constitutes a majority of the directors, trustees or management of the private equity fund; or

(iv)  Owns or controls more than 5 percent of any class of voting shares or similar interests in the private equity fund and is the investment adviser to the fund.

[Codified to 12 C.F.R. § 225.173]

[Section 225.173 added at 65 Fed. Reg. 16475, March 28, 2000, effective March 17, 2000; 66 Fed. Reg. 8487, January 31, 2001, effective February 15, 2001]

§ 225.174  What aggregate thresholds apply to merchant banking investments?

(a)  In general.  A financial holding company may not, without Board approval, directly or indirectly acquire any additional shares, assets or ownership interests under this subpart or make any additional capital contribution to any company the shares, assets or ownership interests of which are held by the financial holding company under this subpart if the aggregate carrying value of all merchant banking investments held by the financial holding company under this subpart exceeds:

(1)  30 percent of the Tier 1 capital of the financial holding company; or

(2)  After excluding interests in private equity funds, 20 percent of the Tier 1 capital of the financial holding company.

(b)  How do these thresholds apply to a private equity fund?  Paragraph (a) of this section applies to the interest acquired or controlled by the financial holding company under this subpart in a private equity fund. Paragraph (a) of this section does not apply to any interest in a company held by a private equity fund or to any interest held by a person that is not affiliated with the financial holding company.

(c)  How long do these thresholds remain in effect?  This § 225.174 shall cease to be effective on the date that a final rule issued by the Board that specifically addresses the appropriate regulatory capital treatment of merchant banking investments becomes effective.

[Codified to 12 C.F.R. § 225.174]

[Section 225.174 added at 65 Fed. Reg. 16475, March 28, 2000, effective March 17, 2000; amended at 66 Fed. Reg. 8488, January 31, 2001, effective February 15, 2001]

§ 225.175  What risk management, record keeping and reporting policies are required to make merchant banking investments?

(a)  What internal controls and records are necessary?--(1)  General.  A financial holding company, including a private equity fund controlled by a financial holding company, that makes investments under this subpart must establish and maintain policies, procedures, records and systems reasonably designed to conduct, monitor and manage such investment activities and the risks associated with such investment activities in a safe and sound manner, including policies, procedures, records and systems reasonably designed to:

(i)  Monitor and assess the carrying value, market value and performance of each investment and the aggregate portfolio;

(ii)  Identify and manage the market, credit, concentration and other risks associated with such investments;

(iii)  Identify, monitor and assess the terms, amounts and risks arising from transactions and relationships (including contingent fees or contingent interests) with each company in which the financial holding company holds an interest under this subpart;

(iv)  Ensure the maintenance of corporate separateness between the financial holding company and each company in which the financial holding company holds an interest under this subpart and protect the financial holding company and its depository institution subsidiaries from legal liability for the operations conducted and financial obligations of each such company; and

(v)  Ensure compliance with this part and any other provisions of law governing transactions and relationships with companies in which the financial holding company holds an interest under this subpart (e.g., fiduciary principles or sections 23A and 23B of the Federal Reserve Act (12 U.S.C. 371c, 371c--1), if applicable).

(2)  Availability of records.  A financial holding company must make the policies, procedures and records required by paragraph (a)(1) of this section available to the Board or the appropriate Reserve Bank upon request.

(b)  What periodic reports must be filed?  A financial holding company must provide reports to the appropriate Reserve Bank in such format and at such times as the Board may prescribe.

(c)  Is notice required for the acquisition of companies?--(1)  Fulfillment of statutory notice requirement.  Except as required in paragraph (c)(2) of this section, no post-acquisition notice under section 4(k)(6) of the Bank Holding Company Act (12 U.S.C. 1843(k)(6)) is required by a financial holding company in connection with an investment made under this subpart if the financial holding company has previously filed a notice under § 225.87 indicating that it had commenced merchant banking investment activities under this subpart.

(2)  Notice of large individual investments.  A financial holding company must provide written notice to the Board on the appropriate form within 30 days after acquiring more than 5 percent of the voting shares, assets or ownership interests of any company under this subpart, including an interest in a private equity fund, at a total cost to the financial holding company that exceeds the lesser of 5 percent of the Tier 1 capital of the financial holding company or $200 million.

[Codified to 12 C.F.R. § 225.175]

[Section 225.175 added at 65 Fed. Reg. 16476, March 28, 2000, effective March 17, 2000; amended at 66 Fed. Reg. 8488, January 31, 2001, effective February 15, 2001]

§ 225.176  How do the statutory cross marketing and sections 23A and B limitations apply to merchant banking investments?

(a)  Are cross marketing activities prohibited?--(1)  In general.  A depository institution, including a subsidiary of a depository institution, controlled by a financial holding company may not:

(i)  Offer or market, directly or through any arrangement, any product or service of any company if more than 5 percent of the company's voting shares, assets or ownership interests are owned or controlled by the financial holding company pursuant to this subpart; or

(ii)  Allow any product or service of the depository institution, including any product or service of a subsidiary of the depository institution, to be offered or marketed, directly or through any arrangement, by or through any company described in paragraph (a)(1)(i) of this section.

(2)  How are certain subsidiaries treated?  For purposes of paragraph (a)(1) of this section, a subsidiary of a depository institution does not include a financial subsidiary held in accordance with section 5136A of the Revised Statutes (12 U.S.C. 24a) or section 46 of the Federal Deposit Insurance Act (12 U.S.C. 1831w), any company held by a company owned in accordance with section 25 or 25A of the Federal Reserve Act (12 U.S.C. 601 et seq.; 12 U.S.C. 611 et seq.), or any company held by a small business investment company owned in accordance with the Small Business Investment Act of 1958 (15 U.S.C. 661 et seq.).

(3)  How do the cross marketing restrictions apply to private equity funds?  The restriction contained in paragraph (a)(1) of this section does not apply to:

(i)  Portfolio companies held by a private equity fund that the financial holding company does not control; or

(ii)  The sale, offer or marketing of any interest in a private equity fund, whether or not controlled by the financial holding company.

(b)  When are companies held under section 4(k)(4)(H) affiliates under sections 23A and B?--(1)  Rebuttable presumption of control.  The following rebuttable presumption of control shall apply for purposes of sections 23A and 23B of the Federal Reserve Act (12 U.S.C. 371c, 371c--1): if a financial holding company directly or indirectly owns or controls more than 15 percent of the total equity of a company pursuant to this subpart, the company shall be presumed to be an affiliate of any member bank that is affiliated with the financial holding company.

(2)  Request to rebut presumption.  A financial holding company may rebut this presumption by providing information acceptable to the Board demonstrating that the financial holding company does not control the company.

(3)  Presumptions that control does not exist.  Absent evidence to the contrary, the presumption in paragraph (b)(1) of this section will be considered to have been rebutted without Board approval under paragraph (b)(2) of this section if any one of the following requirements are met:

(i)  No officer, director or employee of the financial holding company serves as a director, trustee, or general partner (or individual exercising similar functions) of the company;

(ii)  A person that is not affiliated or associated with the financial holding company owns or controls a greater percentage of the equity capital of the portfolio company than the amount owned or controlled by the financial holding company, and no more than one officer or employee of the holding company serves as a director or trustee (or individual exercising similar functions) of the company; or

(iii)  A person that is not affiliated or associated with the financial holding company owns or controls more than 50 percent of the voting shares of the portfolio company, and officers and employees of the holding company do not constitute a majority of the directors or trustees (or individuals exercising similar functions) of the company.

(4)  Convertible instruments.  For purposes of paragraph (b)(1) of this section, equity capital includes options, warrants and any other instrument convertible into equity capital.

(5)  Application of presumption to private equity funds.  A financial holding company will not be presumed to own or control the equity capital of a company for purposes of paragraph (b)(1) of this section solely by virtue of an investment made by the financial holding company in a private equity fund that owns or controls the equity capital of the company unless the financial holding company controls the private equity fund as described in § 225.173(d)(4).

(6)  Application of sections 23A and B to U.S. branches and agencies of foreign banks.  Sections 23A and 23B of the Federal Reserve Act (12 U.S.C. 371c, 371c--1) shall apply to all covered transactions between each U.S. branch and agency of a foreign bank that acquires or controls, or that is affiliated with a company that acquires or controls, merchant banking investments and--

(i)  Any portfolio company that the foreign bank or affiliated company controls or is presumed to control under paragraph (b)(1) of this section; and

(ii)  Any company that the foreign bank or affiliated company controls or is presumed to control under paragraph (b)(1) of this section if the company is engaged in acquiring or controlling merchant banking investments and the proceeds of the covered transaction are used for the purpose of funding the company's merchant banking investment activities.

[Codified to 12 C.F.R. § 225.176]

[Section 225.176 added at 66 Fed. Reg. 8488, January 31, 2001, effective February 15, 2001]

§ 225.177  Definitions.

(a)  What do references to a financial holding company include?--(1)  Except as otherwise expressly provided, the term "financial holding company" as used in this subpart means the financial holding company and all of its subsidiaries, including a private equity fund or other fund controlled by the financial holding company.

(2)  Except as otherwise expressly provided, the term "financial holding company" does not include a depository institution or subsidiary of a depository institution or any portfolio company controlled directly or indirectly by the financial holding company.

(b)  What do references to a depository institution include?  For purposes of this subpart, the term "depository institution" includes a U.S. branch or agency of a foreign bank.

(c)  What is a portfolio company?  A portfolio company is any company or entity:

(1)  That is engaged in any activity not authorized for the financial holding company under section 4 of the Bank Holding Company Act (12 U.S.C. 1843); and

(2)  Any shares, assets or ownership interests of which are held, owned or controlled directly or indirectly by the financial holding company pursuant to this subpart, including through a private equity fund that the financial holding company controls.

(d)  Who are the executive officers of a company?--(1)  An executive officer of a company is any person who participates or has the authority to participate (other than in the capacity as a director) in major policymaking functions of the company, whether or not the officer has an official title, the title designates the officer as an assistant, or the officer serves without salary or other compensation.

(2)  The term "executive officer" does not include--

(i)  Any person, including a person with an official title, who may exercise a certain measure of discretion in the performance of his duties, including the discretion to make decisions in the ordinary course of the company's business, but who does not participate in the determination of major policies of the company and whose decisions are limited by policy standards fixed by senior management of the company; or

(ii)  Any person who is excluded from participating (other than in the capacity of a director) in major policymaking functions of the company by resolution of the board of directors or by the bylaws of the company and who does not in fact participate in such policymaking functions.

[Codified to 12 C.F.R. § 225.177]

[Section 225.177 added at 66 Fed. Reg. 8489, January 31, 2001, effective February 15, 2001]

Subpart K—Proprietary Trading and Relationships With Hedge Funds and Private Equity Funds

§ 225.180  Definitions.

For purposes of this subpart:

(a)  Banking entity means:

(1)  Any insured depository institution;

(2)  Any company that controls an insured depository institution;

(3)  Any company that is treated as a bank holding company for purposes of section 8 of the International Banking Act of 1978; and

(4)  Any affiliate or subsidiary of any of the foregoing entities.

(b)  Hedge fund and private equity fund means an issuer that would be an investment company, as defined in the Investment Company Act of 1940 (15 U.S.C. 80a--1 et seq.), but for section 3(c)(1) or 3(c)(7) of that Act, or such similar funds as the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission may, by rule, as provided in section 13(b)(2) of the Bank Holding Company Act (12 U.S.C. 1851(b)(2)), determine.

(c)  Insured depository institution has the same meaning as given that term in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813), except that for purposes of this subpart the term shall not include an institution that functions solely in a trust or fiduciary capacity if--

(1)  All or substantially all of the deposits of such institution are in trust funds and are received in a bona fide fiduciary capacity;

(2)  No deposits of such institution which are insured by the Federal Deposit Insurance Corporation are offered or marketed by or through an affiliate of such institution;

(3)  Such institution does not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties or others or make commercial loans; and

(4)  Such institution does not--

(i)  Obtain payment or payment related services form any Federal Reserve bank, including any service referred to in section 11A of the Federal Reserve Act (12 U.S.C. 248a); or

(ii)  Exercise discount or borrowing privileges pursuant to section 19(b)(7) of the Federal Reserve Act (12 U.S.C. 416(b)(7)).

(d)  Nonbank financial company supervised by the Board means a nonbank financial company supervised by the Board of Governors, as defined in section 102 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (12 U.S.C. 5311).

(e)  Board means the Board of Governors of the Federal Reserve System.

(f) Illiquid fund means a hedge fund or private equity fund that:

(1)  As of May 1, 2010--

(i)  Was principally invested in illiquid assets; or

(ii)  Was invested in, and contractually committed to principally invest in, illiquid assets; and

(2)  Makes all investments pursuant to, and consistent with, an investment strategy to principally invest in illiquid assets.

(g)  Illiquid assets means any real property, security, obligation, or other asset that--

(1)  Is not a liquid asset;

(2)  Because of statutory or regulatory restrictions applicable to the hedge fund, private equity fund or asset, cannot be offered, sold, or otherwise transferred by the hedge fund or private equity fund to a person that is unaffiliated with the relevant banking entity; or

(3)  Because of contractual restrictions applicable to the hedge fund, private equity fund or asset, cannot be offered, sold, or otherwise transferred by the hedge fund or private equity fund for a period of 3 years or more to a person that is unaffiliated with the relevant banking entity.

(h)  Liquid asset means:

(1)  Cash or cash equivalents;

(2)  An asset that is traded on a recognized, established exchange, trading facility or other market on which there exist independent, bona fide offers to buy and sell so that a price reasonably related to the last sales price or current bona fide competitive bid and offer quotations can be determined for the particular asset almost instantaneously;

(3)  An asset for which there are bona fide, competitive bid and offer quotations in a recognized inter-dealer quotation system or similar system or for which multiple dealers furnish bona fide, competitive bid and offer quotations to other brokers and dealers on request;

(4)  An asset the price of which is quoted routinely in a widely disseminated publication that is readily available to the general public or through an electronic service that provides indicative data from real-time financial networks;

(5)  An asset with an initial term of one year or less and the payments on which at maturity may be settled, closed-out, or paid in cash or one or more other liquid assets described in paragraphs (h)(1), (2), (3), or (4); and

(6)  Any other asset that the Board determines, based on all the facts and circumstances, is a liquid asset.

(i)  Principally invested and related definitions. A hedge fund or private equity fund:

(1)  Is principally invested in illiquid assets if at least 75 percent of the fund's consolidated total assets are--

(i)  Illiquid assets; or

(ii)  Risk-mitigating hedges entered into in connection with and related to individual or aggregated positions in, or holdings of, illiquid assets;

(2)  Is contractually committed to principally invest in illiquid assets if the fund's organizational documents, other documents that constitute a contractual obligation of the fund, or written representations contained in the fund's offering materials distributed to potential investors provide for the fund to be principally invested in assets described in paragraph (i)(1) at all times other than during temporary periods, such as the period prior to the initial receipt of capital contributions from investors or the period during which the fund's investments are being liquidated and capital and profits are being returned to investors; and

(3)  Has an investment strategy to principally invest in illiquid assets if the fund--

(i)  Markets or holds itself out to investors as intending to principally invest in assets described in paragraph (i)(1) of this section; or

(ii)  Has a documented investment policy of principally investing in assets described in paragraph (i)(1) of this section.

[Codified to 12 C.F.R. § 225.180]

[Section 225.180 added at 76 Fed. Reg. 8275, February 14, 2011, effective April 1, 2011]

§ 225.181  Conformance Period for Banking Entities Engaged in Prohibited Proprietary Trading or Private Fund Activities.

(a)  Conformance Period--(1)  In general. Except as provided in paragraph (b)(2) or (3) of this section, a banking entity shall bring its activities and investments into compliance with the requirements of section 13 of the Bank Holding Company Act (12 U.S.C. 1851) and this subpart no later than 2 years after the earlier of:

(i)  July 21, 2012; or

(ii)  Twelve months after the date on which final rules adopted under section 13(b)(2) of the Bank Holding Company Act (12 U.S.C. 1851(b)(2)) are published in the Federal Register.

(2)  New banking entities.--A company that was not a banking entity, or a subsidiary or affiliate of a banking entity, as of July 21, 2010, and becomes a banking entity, or a subsidiary or affiliate of a banking entity, after that date shall bring its activities and investments into compliance with the requirements of section 13 of the Bank Holding Company Act (12 U.S.C. 1851) and this subpart before the later of--

(i)  The conformance date determined in accordance with paragraph (a)(1) of this section; or

(ii)  Two years after the date on which the company becomes a banking entity or a subsidiary or affiliate of a banking entity.

(3)  Extended conformance period. The Board may extend the two-year period under paragraph (a)(1) or (2) of this section by not more than three separate one-year periods, if, in the judgment of the Board, each such one-year extension is consistent with the purposes of section 13 of the Bank Holding Company Act (12 U.S.C. 1851) and this subpart and would not be detrimental to the public interest.

(b)  Illiquid funds--(1)  Extended transition period. the Board may further extend the period provided by paragraph (a) of this section during which a banking entity may acquire or retain an equity, partnership, or other ownership interest in, or otherwise provide additional capital to, a private equity fund or hedge fund if--

(i)  The fund is an illiquid fund; and

(ii)  The acquisition or retention of such interest, or provision of additional capital, is necessary to fulfill a contractual obligation of the banking entity that was in effect on May 1, 2010.

(2)  Duration limited. The Board may grant a banking entity only one extension under paragraph (b)(1) of this section and such extension--

(i)  May not exceed 5 years beyond any conformance period granted under paragraph (a)(3) of this section; and

(ii)  Shall terminate automatically on the date during any such extension on which the banking entity is no longer under a contractual obligation described in paragraph (b)(1)(ii).

(3)  Contractual obligation. For purposes of this paragraph (b)--

(i)  A banking entity has a contractual obligation to take or retain an equity, partnership, or other ownership interest in an illiquid fund if the banking entity is prohibited from redeeming all of its equity, partnership, or other ownership interests in the fund, and from selling or otherwise transferring all such ownership interests to a person that is not an affiliate of the banking entity--

(A)  Under the terms of the banking entity's equity, partnership, or other ownership interest in the fund or the banking entity's other contractual arrangements with the fund or unaffiliated investors in the fund; or

(B)  If the banking entity is the sponsor of the fund, under the terms of a written representation made by the banking entity in the fund's offering materials distributed to potential investors;

(ii)  A banking entity has a contractual obligation to provide additional capital to an illiquid fund if the banking entity is required to provide additional capital to such fund--

(A)  Under the terms of its equity, partnership or other ownership interest in the fund or the banking entity's other contractual arrangements with the fund or unaffiliated investors in the fund; or

(B)  If the banking entity is the sponsor of the fund, under the terms of a written representation made by the banking entity in the fund's offering materials distributed to potential investors; and

(iii)  A banking entity shall be considered to have a contractual obligation for purposes of paragraph (b)(3)(i) or (ii) of this section only if--

(A)  The obligation may not be terminated by the banking entity or any of its subsidiaries or affiliates under the terms of its agreement with the fund; and

(B)  In the case of an obligation that may be terminated with the consent of other persons, the banking entity and its subsidiaries and affiliates have used their reasonable best efforts to obtain such consent and such consent has been denied.

(c)  Approval Required to Hold Interests in Excess of Time Limit. The conformance period in paragraph (a) of this section may be extended in accordance with paragraph (a)(3) or (b) of this section only with the approval of the Board. A banking entity that seeks the Board's approval for an extension of the conformance period under paragraph (a)(3) or for an extended transition period under paragraph (b)(1) must--

(1)  Submit a request in writing to the Board at least 180 days prior to the expiration of the applicable time period;

(2)  Provide the reasons why the banking entity believes the extension should be granted, including information that addresses the factors in paragraph (d)(1) of this section; and

(3)  Provide a detailed explanation of the banking entity's plan for divesting or conforming the activity or investment(s).

(d)  Factors governing Board determinations--(1)  Extension requests generally. In reviewing any application by a specific company for an extension under paragraph (a)(3) or (b)(1) of this section, the Board may consider all the facts and circumstances related to the activity, investment, or fund, including, to the extent relevant--

(i)  Whether the activity or investment--

(A)  Involves or results in material conflicts of interest between the banking entity and its clients, customers or counterparties;

(B)  Would result, directly or indirectly, in a material exposure by the banking entity to high-risk assets or high-risk trading strategies;

(C)  Would pose a threat to the safety and soundness of the banking entity; or

(D)  Would pose a threat to the financial stability of the United States;

(ii)  Market conditions;

(iii)  The nature of the activity or investment;

(iv)  The date that the banking entity's contractual obligation to make or retain an investment in the fund was incurred and when it expires;

(v)  The contractual terms governing the banking entity's interest in the fund;

(vi)  The degree of control held by the banking entity over investment decisions of the fund;

(vii)  the types of assets held by the fund, including whether any assets that were illiquid when first acquired by the fund have become liquid assets, such as, for example, because any statutory, regulatory, or contractual restrictions on the offer, sale, or transfer of such assets have expired;

(viii)  The date on which the fund is expected to wind up its activities and liquidate, or its investments may be redeemed or sold;

(ix)  The total exposure of the banking entity to the activity or investment and the risks that disposing of, or maintaining, the investment or activity may pose to the banking entity or the financial stability of the United States;

(x)  The cost to the banking entity of divesting or disposing of the activity or investment within the applicable period;

(xi)  Whether the divestiture or conformance of the activity or investment would involve or result in a material conflict of interest between the banking entity and unaffiliated clients, customers or counterparties to which it owes a duty;

(xii)  The banking entity's prior efforts to divest or conform the activity or investment(s), including, with respect to an illiquid fund, the extent to which the banking entity has made efforts to terminate or obtain a waiver of its contractual obligation to take or retain an equity, partnership, or other ownership interest in, or provide additional capital to, the illiquid fund; and

(xiii)  Any other factor that the Board believes appropriate.

(2)  Timing of Board review. The Board will seek to act on any request for an extension under paragraph (a)(3) or (b)(1) of this section no later than 90 calendar days after the receipt of a complete record with respect to such request.

(3)  Consultation. In the case of a banking entity that is primarily supervised by another Federal banking agency, the Securities and Exchange Commission, or the Commodity Futures Trading Commission, the Board will consult with such agency prior to the approval of a request by the banking entity for an extension under paragraph (a)(3) or (b)(1) of this section.

(e)  Authority to impose restrictions on activities or investments during any extension period--(1)  In general. The Board may impose such condition on any extension approved under paragraph (a)(3) or (b)(1) of this section as the Board determines are necessary or appropriate to protect the safety and soundness of the banking entity or the financial stability of the United States, address material conflicts of interest or other unsound banking practices, or otherwise further the purposes of section 13 of the Bank Holding Company Act (12 U.S.C. 1851) and this subpart.

(2)  Consultation. In the case of a banking entity that is primarily supervised by another Federal banking agency, the Securities and Exchange Commission, or the Commodity Futures Trading Commission, the Board will consult with such agency prior to imposing conditions on the approval of a request by the banking entity for an extension under paragraph (a)(3) or (b)(1) of this section.

[Codified to 12 C.F.R. § 225.181]

[Section 225.181 added at 76 Fed. Reg. 8276, February 14, 2010, effective April 1, 2010]

§ 225.182  Conformance Period for Nonbank Financial Companies Supervised by the Board Engaged in Proprietary Trading or Private Fund Activities.

(a)  Divestiture Requirement. A nonbank financial company supervised by the Board shall come into compliance with all applicable requirements of section 13 of the Bank Holding Company Act (12 U.S.C. 1851) and this subpart, including any capital requirements or quantitative limitations adopted thereunder and applicable to the company, not later than 2 years after the date the company becomes a nonbank financial company supervised by the Board.

(b)  Extensions. The Board may, by rule or order, extend the two-year period under paragraph (a) by not more than three separate one-year periods, if, in the judgment of the Board, each such one-year extension is consistent with the purposes of section 13 of the Bank Holding Company Act (12 U.S.C. 1851) and this subpart and would not be detrimental to the public interest.

(c)  Approval Required to Hold Interests in Excess of Time Limit. A nonbank financial company supervised by the Board that seeks the Board's approval for an extension of the conformance period under paragraph (b) of this section must--

(1)  Submit a request in writing to the Board at least 180 days prior to the expiration of the applicable time period;

(2)  Provide the reason why the nonbank financial company supervised by the Board believes the extension should be granted; and

(3)  Provide a detailed explanation of the company's plan for conforming the activity or investment(s) to any applicable requirements established under section 13(a)(2) or (f)(4) of the Bank Holding Company Act (12 U.S.C. 1851(a)(2) and (f)(4)).

(d)  Factors governing Board determinations--(1)  In general. In reviewing any application for an extension under paragraph (b) of this section, the Board may consider all the facts and circumstances related to the nonbank financial company and the request including, to the extent determined relevant by the Board, the factors described in § 225.181(d)(1).

(2)  Timing. The Board will seek to act on any request for an extension under paragraph (b) of this section no later than 90 calendar days after the receipt of a complete record with respect to such request.

(f)  Authority to impose restrictions on activities or investments during any extension period. The Board may impose conditions on any extension approved under paragraph (b) of this section as the Board determines are necessary or appropriate to protect the safety and soundness of the nonbank financial company or the financial stability of the United States, address material conflicts of interest or other unsound practices, or otherwise further the purposes of section 13 of the Bank Holding Company Act (12 U.S.C. 1851) and this subpart.

[Codified to 12 CFR 225.182]

[Section 225.182 added at 76 Fed. Reg. 8278, February 14, 2010, effective April 1, 2010]

Subpart L—Conditions to Orders

§ 225.200  Conditions to Board's section 20 orders.

(a)  Introduction. Under section 20 of the Glass-Steagall Act (12 U.S.C. 377) and section 4(c)(8) of the Bank Holding Company Act (12 U.S.C. 1843(c)(8)), a nonbank subsidiary of a bank holding company may to a limited extent underwrite and deal in securities for which underwriting and dealing by a member bank is prohibited. Pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, these so-called section 20 subsidiaries are required to register with the SEC as broker-dealers and are subject to all the financial reporting, anti-fraud and financial responsibility rules applicable to broker-dealers. In addition, transactions between insured depository institutions and their section 20 affiliates are restricted by sections 23A and 23B of the Federal Reserve Act (12 U.S.C. 371c and 371c--1). The Board expects a section 20 subsidiary, like any other subsidiary of a bank holding company, to be operated prudently. Doing so would include observing corporate formalities (such as the maintenance of separate accounting and corporate records), and instituting appropriate risk management, including independent trading and exposure limits consistent with parent company guidelines.

(b)  Conditions. As a condition of each order approving establishment of a section 20 subsidiary, a bank holding company shall comply with the following conditions.

(1)  Capital. (i)  A bank holding company shall maintain adequate capital on a fully consolidated basis. If operating a section 20 authorized to underwrite and deal in all types of debt and equity securities, a bank holding company shall maintain strong capital on a fully consolidated basis.

(ii)  In the event that a bank or thrift affiliate of a section 20 subsidiary shall become less than well capitalized (as defined in section 38 of the Federal Deposit Insurance Act, 12 U.S.C. 1831o), and the bank holding company shall fail to restore it promptly to the well capitalized level, the Board may, in its discretion, reimpose the funding, credit extension and credit enhancement firewalls contained in its 1989 order allowing underwriting and dealing in bank-ineligible securities,1 or order the bank holding company to divest the section 20 subsidiary.

(iii)  A foreign bank that operates a branch or agency in the United States shall maintain strong capital on a fully consolidated basis at levels above the minimum levels required by the Basle Capital Accord. In the event that the Board determines that the foreign bank's capital has fallen below these levels and the foreign bank fails to restore its capital position promptly, the Board may, in its discretion, reimpose the funding, credit extension and credit enhancement firewalls contained in its 1990 order allowing foreign banks to underwrite and deal in bank-ineligible securities,2 or order the foreign bank to divest the section 20 subsidiary.

(2)  Internal controls. (i)  Each bank holding company or foreign bank shall cause it subsidiary banks, thrifts, branches or agencies3 to adopt policies and procedures, including appropriate limits on exposure, to govern their participation in transactions underwritten or arranged by a section 20 affiliate.

(ii)  Each bank holding company or foreign bank shall ensure that an independent and thorough credit evaluation has been undertaken in connection with participation by a bank, thrift, or branch or agency in such transactions, and that adequate documentation of that evaluation is maintained for review by examiners of the appropriate federal banking agency and the Federal Reserve.

(3)  Interlocks restriction. (i)  Directors, officers or employees of a bank or thrift subsidiary of a bank holding company, or a bank or thrift subsidiary or branch or agency of a foreign bank, shall not serve as a majority of the board of directors or the chief executive officer of an affiliated section 20 subsidiary.

(ii)  Directors, officers or employees of a section 20 subsidiary shall not serve as a majority of the board of directors or the chief executive officer of an affiliated bank or thrift subsidiary or branch or agency, except that the manager of a branch or agency may act as a director of the underwriting subsidiary.

(iii)  For purposes of this standard, the manager of a branch or agency of a foreign bank generally will be considered to be the chief executive officer of the branch or agency.

(4)  Customer disclosure--(i)  Disclosure to section 20 customers. A section 20 subsidiary shall provide, in writing, to each of its retail customers,4 at the time an investment account is opened, the same minimum disclosures, and obtain the same customer acknowledgement, described in the Interagency Statement on Retail Sales of Nondeposit Investment Products (Statement) as applicable in such situations. These disclosures must be provided regardless of whether the section 20 subsidiary is itself engaged in activities through arrangements with a bank that is covered by the Statement.

(ii)  Disclosures accompanying investment advice. A director, officer, or employee of a bank, thrift, branch or agency may not express an opinion on the value or the advisability of the purchase or the sale of a bank-ineligible security that he or she knows is being underwritten or dealt in by a section 20 affiliate unless he or she notifies the customer of the affiliate's role.

(5)  Intra-day credit. Any intra-day extension of credit to a section 20 subsidiary by an affiliated bank, thrift, branch or agency shall be on market terms consistent with section 23B of the Federal Reserve Act.

(6)  Restriction on funding purchases of securities during underwriting period. No bank, thrift, branch or agency shall knowingly extend credit to a customer secured by, or for the purpose of purchasing, any bank-ineligible security that a section 20 affiliate is underwriting or has underwritten within the past 30 days, unless:

(i)  The extension of credit is made pursuant to, and consistent with any conditions imposed in a preexisting line of credit that was not established in contemplation of the underwriting; or

(ii)  The extension of credit is made in connection with clearing transactions for the section 20 affiliate.

(7)  Reporting requirement. (i)  Each bank holding company or foreign bank shall submit quarterly to the appropriate Federal Reserve Bank any FOCUS report filed with the NASD or other self-regulatory organizations, and any information required by the Board to monitor compliance with these operating standards and section 20 of the Glass-Steagall Act, on forms provided by the Board.

(ii)  In the event that a section 20 subsidiary is required to furnish notice concerning its capitalization to the Securities and Exchange Commission pursuant to 17 CFR 240.17a--11, a copy of the notice shall be filed concurrently with the appropriate Federal Reserve Bank.

(8)  Foreign banks. A foreign bank shall ensure that any extension of credit by its branch or agency to a section 20 affiliate, and any purchase by such branch or agency, as principal or fiduciary, of securities for which a section 20 affiliate is a principal underwriter, conforms to sections 23A and 23B of the Federal Reserve Act, and that its branches and agencies not advertise or suggest that they are responsible for the obligations of a section 20 affiliate, consistent with section 23B(c) of the Federal Reserve Act.

[Section 225.200 added at 62 Fed. Reg. 45306, August 27, 1997, effective October 27, 1997; amended at 63 Fed. Reg. 14804, March 27, 1998; moved to Subpart L, 76 Fed. Reg. 8265, effective April 1, 2011]

1Before January 1, 2015, the Board will consider the financial standards at 12 CFR part 225 appendices A, C, and E for a bank holding company that is not an advanced approaches bank holding company. Go back to Text

1Firewalls 5--8, 19, 21 and 22 of J.P. Morgan & Co., The Chase Manhattan Corp., Bankers Trust New York Corp., Citicorp, and Security Pacific Corp., 75 Federal Reserve Bulletin 192, 214--16 (1989). Go back to Text

2Firewalls 5--8, 19, 21 and 22 of Canadian Imperial Bank of Commerce, The Royal Bank of Canada, Barclays PLC and Barclays Bank PLC, 76 Federal Reserve Bulletin 158, (1990). Go back to Text

3The terms "branch" and "agency" refer to a U.S. branch and agency of a foreign bank. Go back to Text

4For purposes of this operating standard, a retail customer is any customer that is not an "accredited investor" as defined in 17 CFR 230.501(a). Go back to Text


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