Istituto Bancario San Paolo di Torino-Istituto Mobiliare Italiano S.p.A. ("San Paolo-IMI"), a foreign banking organization subject to the provisions of the Bank Holding Company Act ("BHC Act"),(1) has requested the Board's approval to engage through Mabon Securities Corp. ("Mabon") and, in certain cases, through Mabon's wholly owned subsidiary, Cedar Street Securities Corp. ("Cedar Street"), both of New York, New York,(2) in the following nonbanking activities:
(1) Extending credit and servicing loans, in accordance with section 225.28(b)(1) of Regulation Y (12 C.F.R. 225.28(b)(1));
(2) Engaging in activities related to extending credit, in accordance with section 225.28(b)(2) of Regulation Y (12 C.F.R. 225.28(b)(2));
(3) Providing financial and investment advisory services, in accordance with section 225.28(b)(6) of Regulation Y (12 C.F.R. 225.28(b)(6));
(4) Providing securities brokerage, riskless principal, private placement, futures commission merchant, and other agency transactional services, in accordance with section 225.28(b)(7) of Regulation Y (12 C.F.R 225.28(b)(7));
(5) Underwriting and dealing in government obligations and money market instruments in which state member banks may underwrite and deal under 12 U.S.C. [subsections] 335 and 24(7) ("bank-eligible securities"), engaging in investing and trading activities, and buying and selling bullion and related activities, in accordance with section 225.28(b)(8) of Regulation Y (12 C.F.R. 225.28(b)(8)); and
(6) Underwriting and dealing in, to a limited extent, all types of debt and equity securities, except ownership interests in open-end investment companies ("bank-ineligible securities") through Mabon.(3)
Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (63 Federal Register 67,693 (1998)). The time for filing comments has expired, and the Board has considered the notice and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act.
San Paolo-IMI, with total consolidated assets of approximately $200 billion, is the largest banking organization in Italy.(4) In the United States, San Paolo-IMI operates a federally licensed branch in New York, New York, and a representative office in Los Angeles, California.(5) Mabon engages in securities transactions in the United States on behalf of San Paolo-IMI's European affiliates and provides research and investment management services to both U.S. and foreign investors. Mabon and Cedar Street are and will continue to be broker-dealers registered with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (15 U.S.C. [sections] 78a et seq.) and members of the National Association of Securities Dealers, Inc. ("NASD"). Accordingly, Mabon and Cedar Street are and will continue to be subject to the recordkeeping and reporting obligations, fiduciary standards, and other requirements of the Securities Exchange Act, the SEC, and the NASD.
Underwriting and Dealing in Bank-Ineligible Securities
The Board previously has determined-subject to the framework of prudential limitations established in previous decisions to address the potential for conflicts of interests, unsound banking practices, or other adverse effects-that underwriting and dealing in bank-ineligible securities is so closely related to banking as to be a proper incident thereto within the meaning of section 4(c)(8) of the BHC Act.(6) The Board also has determined that underwriting and dealing in bank-ineligible securities is consistent with section 20 of the Glass-Steagall Act (12 U.S.C. [sections] 377), provided that the company engaged in the activity derives no more than 25 percent of its gross revenues from underwriting and dealing in bank-ineligible securities.(7) San Paolo-IMI has committed that Mabon will conduct its underwriting and dealing activities using the methods and procedures and subject to the prudential limitations established by the Board in the Section 20 Orders. …