Federal Reserve Bank of New York. "[Letter Regarding the Board's Regulation Y Permits]," Federal Reserve Bank of New York Circulars (August 7, 1986). https://fraser.stlouisfed.org/title/466/item/527747, accessed on January 20, 2025.

Title: [Letter Regarding the Board's Regulation Y Permits]

Date: August 7, 1986
Page 1
image-container-0 Federal Reserve Bank of New York NEW YO RK, N.Y. 1 0 0 4 5 AREA CODE 212 7 9 1 -5 2 6 8 William L. R u t l e d g e V ic e P r e s id e n t P f [ Q f t ^d August 7, 1986 1b All Bank Holding Companies and Foreign Banking Organizations in the Second Federal Reserve Districts Over the past several months, questions have arisen regarding brokerage of shares of open-end investment companies (i .e., mutual funds) and unit investment trusts ("UITs") by companies that are authorized under Section 4(c)(8) of the Bank Holding Company Act and Section 225.25(b) (15) of Regulation Y of the Board of Governors of the Federal Reserve System (the "Board") to engage in discount securities brokerage activities. Enclosed is a copy of a letter to Sovran Investment Corporation, a subsidiary of Sovran Financial Corporation, Norfolk, Virginia (together, "Sovran") , from the Board's General Counsel, concluding that, under the circumstances specified in the letter, Section 225.25(b) (15) of the Board's Regulation Y permits a discount securities brokerage subsidiary of a bank holding company to engage in certain brokerage activities involving the shares of mutual funds and UITs. Accordingly, bank holding companies and foreign banking organizations with authority to engage in discount securities brokerage activities pursuant to Section 225.25(b) (15) of Regulation Y may now, without seeking additional approvals, conduct brokerage activities with respect to mutual funds and UITs that come within the terms set forth in the enclosed letter to Sovran. Ihe conclusion that no further approval is necessary to engage in the mutual fund and UIT brokerage activities applies as well to bank holding companies and foreign banking organizations that, incident to obtaining discount securities brokerage authority, made commitments to the Federal Reserve System not to engage in certain brokerage activities involving mutual fund and UIT shares, or to limit such activities more extensively than would Sovran under the terms of the enclosed letter. Finally, also enclosed is a checklist prepared by the Board's staff that outlines the limitations described in the letter to Sovran. Questions regarding this matter should be directed to this Bank's Domestic Banking Applications Division, at (212) 791-5864. William L. Rutledge Enclosures (2)
image-container-1 CHECKLIST By letter dated June 27, 1986, the Board's General Counsel concluded that, under the circumstances specified in the letter, section 225•25(b )(15) of the Board's Regulation Y permits a discount brokerage subsidiary of a bank holding company (“Broker0. ) to engage in certain activities involving the shares of mutual funds and unit investment trusts (or ° UITs °)o To stay within the terms of the letter, a Broker musts (1) purchase, sell, or redeem mutual fund or UIT shares solely upon the order and for the account of its customers; (2) exercise no investment discretion regarding the purchase, sale, or redemption of mutual fund or UIT shares? (3) not obligate itself to sell or promote mutual fund or UIT shares? (4) not enter into any agreement that restricts the Broker from making the shares of additional mutual funds or UITs available to the Broker's customers; (5) act as broker for its customers in purchasing, selling, and redeeming the shares of other mutual funds and UITs, consistent with customer demand, operational feasibility, as well as the profitability of handling such other funds or UITs? (6) not advertise or otherwise promote any specific mutual fund or UIT shares, but may advertise its own services regarding mutual fund and UIT shares generally ? (7) provide no investment advice or research services regarding mutual fund or UIT shares? (8) instruct its employees to inform customers that the Broker does not endorse or recommend any such shares; (Over)
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