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-5. includes sample arbitration forms to use in such disputes. The OCC supports arbitration as a dispute resolution mechanism. 7. You have asked us to explain what we mean by an "appropriate suitability
requirement" and how it differs from the NASD's suitability requirements.
The OCC used the term "appropriate suitability requirement" in reference to the suitability requirement contained in the Interagency Statement. That requirement is substantially similar to the one contained in the NASD Rules of Fair Practice. The difference between the two provisions relates to the suitability analysis required of sales personnel in connection with the sale of money market mutual funds. The Interagency Statement requires bank sales personnel to make reasonable efforts to obtain customer information including the customer's financial status, tax status and investment objectives to support the suitability analysis. The NASD Rules specifically exempt money market mutual funds from this requirement.
You have asked whether any of the distributor's activities will be subcontracted to Mellon or Mellon subsidiaries or affiliates. You further ask who is underwriting the issuance of Dreyfus' mutual fund shares.
The Notice does not suggest that any of the distributor's activities will be subcontracted to Mellon or Mellon subsidiaries or affiliates. Mellon has also represented in a letter to you dated February 18, 1994 that it does not contemplate that the third party distributor will subcontract any services to any Mellon entity. Mellon has also represented that neither Mellon nor Dreyfus would underwrite shares. The Notice does not involve any entity that would make a firm commitment to purchase a fixed number of shares at a fixed price from the issuer, and would arrange separately for the sale of purchased shares to the public.
I hope this information is useful to you. If you have any further questions, please contact me at (202) 874-4900 or David Apgar at (202) 874-4890.
Dear Comptroller Ludwig:
Pursuant to Rules X and XI of the Rules of the U.S. House of Representatives, and our continuing oversight of securities and exchanges, we are investigating the facts and circumstances surrounding the proposed merger between the Dreytus Corporation (Dreytus) and Mellon Bank Corporation (MBC) whereby Dreytus will be acquired by Mellon Bank, N.A. (Mellon Bank) as a separate operating subsidiary.
In connection with the Subcommittee hearings today and tomorrow on this matter, serious concerns have been raised regarding the adequacy of the protections that the banking laws afford customers who purchase securities or investment advice in banks. Accordingly, I am transmitting the enclosed 55-page draft table comparison of the regulation of broker-dealers and investment advisers under the tederal securities laws versus under the lederal banking laws. The table summarizes the principal relevant statutes, regulations, and guidelines administered by the Securities and Exchange Commission and by the federal banking agencies. The Subcommittee will be keeping the hearing record open for 30 days to accommodate our request that you caretully review this document and submit any corrections you deem necessary to make this table accurate and complete.
Hf you have any questions about this request, please contact Consuela M. Washington of the statt at (202) 225-3147. Thank you as your cooperation and assistance with the work of the Subcommittee.
This is with reference to the Subcommittee's letter of March 2, 1994 asking you to review our draft table comparing the regulation of broker-dealers and investment advisers under the federal securities laws and under the federal banking laws. The table does not include all the federal securities laws and rules, nor does it address the regulation of banks as transfer agents, municipal, or government securities dealers. This is consistent with the scope of the Subcommittee's inquiry as well as the table's stated scope.
At the request of the Office of the Comptroller of the Currency, we are extending the deadline for your responses to the close of business on Friday, April 8, 1994, at which time we will be closing the hearing record and taking the steps to go to prompt printing. It would be helpful if the recipients of the March 2 letter would meet and discuss (and where possible coordinate) your responses. In any event, your transmittal letters for your corrections should indicate the name and phone number of a contact person on your staft, in the event that we have questions about your submission.
The Subcommittee greatly appreciates your cooperation and assistance with our work. We firmly believe that these issues are of vital importance to the protection of the public
John D. Dingell
Chairman Subcommittee on Oversight
The Honorable Dan Schaefer
Dear Comptroller Ludwig:
This is in reference to your letter of April 8, 1994 trans-
To the extent that your comments suggest substantive correc-
In connection with our review of the occ's comments, the
The Honorable Eugene A. Ludwig
1. The occ memorandum cites 12 C.F.R. Part 9 in numerous places as providing customer protection to investors who purchase securities through banks. For example, in commenting on section 1.D of the table (sales practices), the occ memorandum notes that "OCC regulation 9.7(d), 12 C.F.R. S 9.7(a), provides that every national bank exercising fiduciary powers shall adopt written policies and procedures to ensure compliance with the Federal securities laws in connection with any decision or recommendation to purchase or sell any security." (OCC Memorandum at 7) The occ memorandum also cites Part 9 in commenting on the registration, chinese walls, recordkeeping and confirmation, and examination requirements applicable to bank brokerage activities.
The Subcommittee has reviewed the Interagency Statement and OCC Bulletin 94-13, and has researched occ letters authorizing brokerage activities for national banks. We do not know of any instance in which the occ determined that such activities require approval as fiduciary activities subject to 12 U.S.C. 92a and 12 C.F.R. Part 9.1 Moreover, we are not aware of any occ requirement that a customer enter into a trust agreement with a bank prior to brokerage services being made available. We therefore request that you provide citations to orders or releases in which the occ has advised banks that their brokerage activities are subject to section 92a and 12 C.F.R. Part 9.
2. Your letter cites an occ proceeding. In the matter of Thelma Elizabeth Pollard (1992), as an example of the occ's use of 12 C.F.R. S 1818 to reach violations of the antifraud provisions of the federal securities laws.
We are aware that the SEC filed and settled a complaint against Ms. Pollard for violation of section 17(a) of the Securities Act of 1933 in October 1991. (See SEC Litigation Release No. 13033, Oct. 9, 1991.) The SEC alleged that Ms. Pollard prematurely "broke" bank customers' time deposits and invested the funds, without the customers' knowledge or consent, in commercial paper of the bank's holding company.
Subsequently, the occ initiated civil money penalty and removal and prohibition proceedings against Ms. Pollard pursuant to S 1818 on December 4, 1991. Ms. Pollard entered into a stipulation and consent order with the occ on May 19, 1992. (See 1992 OCC Enf. Dec. No. 625.) On the basis of occ records avail
In this connection, we note that the occ memorandum states that the "OCC has developed two distinct cadres of examiners who specialize in securities activities and in fiduciary activities." (OCC Memorandum at 3) This statement appears to acknowledge that national bank brokerage activities are separate from the trust function. If not, please amplify and clarify.