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Federal Trade Commission. The agencies have concluded their premerger review of the transaction and have terminated the waiting period under the Act.
Dreyfus will be maintained as a separate corporate entity.
Accordingly, it will continue to be registered as an investment
adviser and subject to regulation by the SEC under the Investment
Advisers Act of 1940. Its registered broker-dealer subsidiary, Dreyfus Service Corporation, will remain registered as a broker
dealer with and subject to regulation by the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
These commitments were contemplated by the OCC Notice and will be
added as specific provisions to the Policy Statement. These commitments are also consistent with Section 104 of H.R. 3447.
Further, to address concerns about Dreyfus' capital, MBC will amend the Policy Statement to provide that it will not withdraw capital if such withdrawal would jeopardize Dreyfus' ability to maintain regulatory capital compliance.
In addition, Dreyfus and its subsidiaries would be subject to regulation by the occ as operating subsidiaries of national banks. In particular, the occ will be responsible for enforcing compliance with the terms and conditions of any order approving the transaction, including commitments made in the Mellon Policy
PEDERAL SECURITIES NID BANKING LAI ISSUES
Securities Las As discussed above, Dreyfus and Dsc will continue to be subject, respectively to the Investment Advisers Act and the Securities Exchange Act. We believe that we have been responsive to the concerns over certain other aspects of the federal securities lans which are reflected in H.R. 3447.
Banking LAWS Before pursuing the Dreyfus transaction, Mellon reviewed with counsel the legal authority for the transaction and, in particular, whether there would be a violation of the Glass
The Notice filed with the occ was accompanied by a legal nemorandun which presents Mellon's position that the proposed transaction is consistent with law and regulation. As pointed out in that nemorandum, the activities in which Dreyfus will be engaged after the transaction have previously been approved by the occ for national bank subsidiaries and are offered by scores
of banks around the country.
RIBK OF DEPOSITOR/INVESTOR COWTUBION
MBC shares the concerns that the Chairman and other members of this Subcommittee have expressed regarding depositor and investor protection, including the need to make customers aware of the distinction between bank deposits and mutual fund shares.
Mellon Bank's basic philosophy with respect to disclosures to
customers as to mutual funds and other investment products reflects the premise of the federal securities laws in regulating securities activities: ensuring the protection of investors through full disclosure concerning securities sold and the prevention of unfair and inequitable practices in the securities market. We believe that both the tining and content of our disclosures to consumers concerning mutual funds will ensure that this philosophy is realized.
First, no MBC entity, including Dreyfus after the merger, will sell shares of a mutual fund or advise a mutual fund if such fund
has a nane, title or logo of Mellon Bank or any other banking subsidiary of MBC (a "Mellon bank") or is so similar to such a nane, title or logo as to be confusing to customers. This commitment appears in the Policy Statement, and it goes significantly beyond other banks competing in the mutual fund business today which continue to use a bank nane in the name of an affiliated mutual fund.
Second, Mellon Bank customers receive disclosures concerning the possible risks of purchasing mutual funds which will be in full compliance with all regulatory guidelines, including the recently-released Interagency Statement on Retail sales of
Nondeposit Investment Products of the occ, Federal Reserve, FDIC, and ots. As set forth in the Policy Statement, the following disclosures will be made to customers who purchase shares of a mutual fund at a Mellon bank branch office or who open an investment or similar account with any MBC entity (including Dreyfus) at a Mellon bank branch office through which he or she can make such purchases:
That the shares are not insured by and are not an obligation of the FDIC or any other government agency; 2. That the shares are not a deposit or other obligation of and are not endorsed or guaranteed by any Mellon bank or any other bank; 3. That the investment poses investment risks, including possible loss of the principal amount invested, and that the investment may fluctuate in value so that when the investment is sold by the customer it may be worth more or less than when purchased by the customer;
To the extent applicable, that there exists an investment adviser relationship between an MBC entity and the mutual fund, and a statement that MBC entities may have other types of relationships (such as custodian or transfer
agent) with the mutual fund; and
That, if applicable, there are sales charges to which
the shares may be subject.
Customers receive disclosures covering the critical differences between mutual funds and bank deposits on at least four and as many as five occasions: First, Mellon bank branches have graphic disclosure signs on their doors and prominently displayed at multiple locations within the branches themselves (a copy of such signs have previously been furnished to the Subcommittee). Second, any customer discussing uninsured investment products with a branch employee is shown and read a disclosure card (copy previously furnished to the Subcommittee). Third, customers establishing brokerage accounts with MBC's registered brokerdealer, InvestNet, or receiving applications to purchase proprietary funds directly from their distributor sign a disclosure form acknowledging receipt of disclosures (copy previously furnished to the Subcommittee). Fourth, the prospectuses for all funds sold will themselves contain the disclosures. Finally, any customer meeting with a registered representative receives oral disclosures from the representative and is encouraged to discuss then with the representative.
POTENTIAL CONFLICTS OF INTEREST
MBC recognizes that it is prudent public policy to ensure that consumers of mutual fund and other investment products offered by or through financial service companies (including banks), and banks themselves, are protected against potential conflicts of interest which might arise from the fact that the companies offer a variety of services to customers. We believe that MBC has