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federal reserve

Ba n k




Circular No. 82-105
August 26, 1982

(Order For Hearing)
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 (

Federal Register / Vol. 47, No. 133 / Monday, July 12, 1982 / Notices

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


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
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
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:


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
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]