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federal reserve Ba n k DALLAS. TEXAS of Dallas 75222 Circular No. 82-105 August 26, 1982 REGULATION Y BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL (Order For Hearing) TO ALL MEMBER BANKS, BANK HOLDING COMPANIES, AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: The Board of Governors of the Federal Reserve System has ordered a hearing on the application filed by BankAmerica Corporation to acquire The Charles Schwab Corporation and thereby engage in certain discount stockbrokering and re la te d service activities. A request for public comment was published in the Federal Register and issued by our Circular No. 82-53, dated May 5, 1982. Subsequently, the Securities Industry Association opposed the application and requested a public hearing to explore the questions on which the Board requested comment. The Board's order announcing the hearing is printed on the following pages. The hearing is scheduled to be commenced Septem ber 8, 1982. Please note th a t this date differs from the original date, Septem ber 13, 1982, announced in the Federal R egister notice. Questions regarding the contents of this circular should be d irected to David W. Dixon, Regulations A ttorney of the Holding Company Supervision D epartm ent, Extension 6182. Additional copies of this circular will be furnished upon request to the D epartm ent of Communications, Financial and Community Affairs, Extension 6289. Sincerely yours, William H. Wallace First Vice President Banks and others are encouraged to use the following incoming WATS numbers in contacting this Bank: 1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the extension referred to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) Federal Register / Vol. 47, No. 133 / Monday, July 12, 1982 / Notices FEDERAL RESERVE SYSTEM BankAmerica Corp.; Order for Hearing BankAmerica Corporation, San Francisco, California, h as applied pursuant to section 4(c)(8) o f the Bank Holding Company A ct o f 1956, as am ended (12 U.S.C. 1843(c)(8)) and § § 225.4(a) and (b)(2) o f the Board's Regulation Y (12 CFR § 225.4(a) and (b)(2)), for perm ission to acquire directly all o f the voting shares o f The Charles Schw ab Corporation, San Francisco, California, and thereby indirectly acquire Charles Schw ab & Company, Inc., San Francisco, California (together “Schwab"). A pplicant w ould engage in securities brokerage, consisting principally o f buying and selling securities so lely upon the order and for the account o f custom ers, margin lending in conform ity w ith the Board's Regulation T, 12 CFR 220, and the offering o f certain specified services for its securities customers. This group o f nonbanking activities h a s not yet b een determ ined b y the Board to be “clo sely related” to banking w ithin the meaning o f section 4(c)(8) o f the A ct and has not b een added to the list o f perm issable activities in section 225.4(a) o f the Board's Regulation Y, 12 CFR 225.4(a). By notice published in the Federal Register on April 14,1982, the Board invited interested persons to express their v ie w s on whether: (1) The proposed activities are so clo sely related to banking or managing or controlling banks a s to be a proper incident thereto; (2) the proposed activities are perm issable under the G lass-Steagall A ct (i.e., 12 U.S.C. 24, 78, 377 and 378(a)), w hich is designed to separate com m ercial from investm ent banking, and, (3) consum m ation o f the proposal can reasonably be exp ected to produce benefits to the public, such as greater convenience, increased ccqipetition, or gains in efficiency, that outw eigh p ossib le adverse effects, such a s undue concentration o f resources, decreased or unfair competition, conflicts o f interest, or unsound banking practices. Parties requesting a hearing w ere directed to state w h y a written presentation w ould not suffice in lieu of a hearing, to identify specifically any disputed question o f fact and to summarize the evidence that w ould be presented at a hearing. By memorandum dated M ay 28,1982, the Securities Industry A ssociation (“SIA") op posed the application. SIA contends that the proposed (or substantially similar) activities have never b een conducted by banks or bank holding com panies to the extent proposed b y Applicant and therefore m ay not be considered “clo sely related” to banking within the meaning o f section 4(c)(8) o f the Act. A dditionally, SIA claim s that the proposed activities are precluded by section s 16 and 20 o f the GSA, since banks are prohibited from conducting such activities by those provisons o f the GSA. Finally, SIA disputes the public benefits alleged by A pplicant to accom pany its proposal and claim s several p ossib le adverse effects (e.g., anticom petitive effects in the product lines o f discount brokerage, conflicts o f interest, possib le failure o f A pplicant to provide its trust and other custom ers the b est brokerage services at the lo w est cost, voluntary tying, unfair com petition due to Schw ab's affiliation w ith a bank and its alleged lo w cost o f funds, public confusion and preemption o f legislative process). In connection w ith these contentions, SIA has requested that the Board hold a 30107 public hearing to explore the questions p osed b y the Board in its Federal Register notice, to investigate the factual prem ises o f A pplicant’s proposal and to exam in e the p ossible adverse effects claim ed by SIA. SIA also sta tes that the record should contain information on the scop e o f Schw ab's proposed operations, including: (1) The extent to w hich Sch w ab w ill take principal positions; (2> w hether Schw ab em ployees w ill receive bonuses; (3) Applicant's plans to promote and market S ch w ab ’s services; (4) resem b lan ces b etw een the proposed activities (including the Charles Schw ab O ne A ccount) and deposit banking; (5) the alleged adverse anticom petitive effects associated w ith the proposal; and (6) A pplicant’s plans to minimize the p ossibility o f voluntary tying. By letter dated June 21,1982, A pplicant opposed SIA's request for a hearing and stated that no disputed material facts have b een raised in connection with its proposal. W hile the Board b eliev es that questions raised in the subm issions of the parties and public com m ents might appropriately be resolved through additional written subm ission or an informal presentation, a procedure that has b een utilized and found effective in other cases, the Board has decided to order a formal hearing conducted under the procedures and time schedule outlined in this Order as agreed to by the A pplicant and SIA. The hearing w ill provide an appropriate and expeditious m ethod to develop a full record for Board consideration of any disputed material fact involved in this proposal. A ccordingly, it is h ereby ordered that a public and formal administrative hearing be held to resolve any disputed issu es o f material fact raised by SIA in its protest. In this connection, the hearing should address the scop e of Applicant's proposed operation of Schw ab and the alleged adverse com petitive effects raised by SIA in its protest. The hearing shall be conducted, excep t as m odified b elow , in accordance w ith Subpart A o f the Board’s Rules of Practice for Hearings, 12 CFR Part 263, and w ill com m ence at 10:00 a.m., Septem ber 13,1982, at the offices o f the Board in W ashington, D.C., before an administrative law judge. In the interest o f concluding such hearing as exp editiously as possible, the hearing shall b e conducted in accordance w ith the follow ing schedule, w hich h as been agreed to by both A pplicant and SIA and w hich shall not b e departed from in any material respect w ithout the Board's prior consent: 30108 Federal Register / Vol. 47, No. 133 / Monday, July 12. 1982 / Notices July 19,1982— Production o f Information resp onse to the requests o f the parties A ugust 18,1982— Subm ission o f Direct Testim ony Septem ber 13-17,1982— Hearing O ctober 1,1982— Subm ission o f Briefs and Proposed Findings o f Fact O ctober 12,1982— Subm ission o f Reply Briefs N ovem ber 12,1982— Filing o f R ecom m ended D ecision N ovem ber 24,1982—Filing o f Exceptions A dditionally, the parties h ave agreed to submit requests for the production of docum ents and other information from the opposing party to the Board for a determ ination as to the general relevan ce and as to the reasonable scope o f specific requests and to abide b y the ruling of the Board's General C ounsel on th ese m atters a s w ell a s on any objections to the production of specific information by a party. By order o f the Board o f G overnors, effe ctiv e July 6,1962. William W. Wiles, Secretary o fth e Board. [FR Doc. 62-18699 Filed 7-0-62; 8:45 am] BILLING CODE 6210-01-M
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