Hon. John D. Dingell Nonetheless, the SEC's own survey demonstrates that customer confusion is not solely, and perhaps not even primarily, a product of bank sales of mutual funds. That survey revealed that there was a higher level of confusion on the FDIC insurance issue for sales at brokerage houses than for sales at banks. Accordingly, it may well be that no individual bank's or brokerage house's efforts, no matter how extensive or detailed, can totally eradicate customer confusion. As mentioned, Mellon and Dreyfus do not regard any level of customer confusion on the insurance issue as acceptable. However, we do not believe that a suspension of sales would be an appropriate response. Indeed, it would harm the vast majority of Mellon Bank customers who would not be confused, but would be denied access to the Dreyfus funds. It could also harm existing fund shareholders because Dreyfus could be required to liquidate assets at potentially unfavorable prices to deal with redemptions. Indeed, we question whether suspension of sales would even help potential customers who are confused. If they cannot purchase fund shares from Mellon, they will purchase shares of another (or the same) fund elsewhere; and if they would be confused on the insurance issue despite Mellon's extensive disclosures and other procedures, they will almost 125_LANO1\82565.1 Hon. John D. Dingell certainly be confused when they purchase the shares from another financial institution. -5 Finally, as stated before, we believe the best way to address customer confusion is through an aggressive disclosure program such as we presented at the Hearing. Very truly yours, Inkl. Colomb Frank V. Cahouet Howard Stem Howard Stein The Dreyfus Corporation cc: The Honorable Dan Schaefer 125_LANO1\82565.1 Disclosure and Information-Sharing Agreement InvestNet Investments sold by InvestNet (including The Laurel Funds and The Boston Company Family of Funds): • ARE NOT INSURED BY THE FDIC OR BY ANY OTHER GOVERNMENT AGENCY; • Are not obligations of the FDIC or any other government agency; • Are not deposits or other obligations of Mellon Bank or any other bank; • Are not endorsed or guaranteed by Mellon Bank or any other bank; • Are subject to investment risks, including possible loss of the principal amount invested; • May fluctuate in value, so that when they are sold they may be worth more or less than when they were purchased. An investment's past performance should not be considered an indication of its future results. InvestNet is a brokerage subsidiary of Mellon Bank Corporation. It is a member of NASD. InvestNet is not a bank and is separate from any affiliated bank. InvestNet is solely responsible for its contractual obligations. The Laurel Funds pay Mellon Bank, N.A. or its affiliate to be their investment adviser. Mellon Bank, N.A. or an affiliate may be paid for performing other services for The Laurel Funds, such as custodian, transfer agent or fund accountant services. The Laurel Funds are distributed by a third party funds distributor that is not an affiliate of Mellon Bank. The Boston Company Family of Funds pays Boston Safe Deposit and Trust Company or an affiliate of Boston Safe to be its investment adviser and custodian. The Boston Company Family of Funds is distributed by a third party funds distributor that is not an affiliate of Boston Safe Deposit and Trust Company. Mellon companies are paid to provide mutual fund services to many other mutual funds. A mutual fund's prospectus discloses the companies providing such services to it, and the fees it pays for those services. Mutual funds purchased through InvestNet (including shares of The Laurel Funds and the Boston Company Family of Funds) may be subject to fees and expenses when they are purchased, during the time that they are held or when they are sold. These fees and expenses are described in detail in each fund's prospectus. Sales charges may make some mutual funds inappropriate as a short term investment. You should read the prospectus of any mutual fund before you invest in it. Investnet charges fees and commissions for its services, as described in InvestNet's Fee Schedule and Commission Schedule. Signature X Signature X Date Date Note: Please sign, date and submit this form, along with your completed new account application, to InvestNet. InvestNet Corporation Member NASD Member The Chicago Stock Exchange TR-0074 Rev. (3/94) LC. (3/94) PD 3/94 Original - InvestNet 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 Dreyfus Corporation (Dreyfus) and Mellon Bank Corporation (MBC) whereby Dreyfus will be acquired by Mellon Bank, N.A. (Mellon Bank) as a separate operating subsidiary. As a starting point, we have reviewed the copy of the Notice of the transaction and supporting documentation that was delivered by MBC to the Committee on Energy and Commerce on January 3, 1994, as well as the responses of MBC and Dreyfus, the Securities and Exchange Commission (SEC), and the Comptroller of the Currency (OCC), responding to the December 10, 1993 GonzalezDingell letter. In order to assist the Subcommittee in its investigation and in preparation for upcoming hearings, your cooperation is requested in providing the following responses by the close of business on Friday, February 25, 1994. 1. The Subcommittee understands that part of the MellonDreyfus proposed merger is subject to approval by the Federal Reserve Board (Board). a. Please explain in detail any applications that the b. Please discuss the Board's views on the advisability of The Honorable Alan Greenspan 2. 3. systems? What types of firewalls or other protections The OCC letter of January 12, 1994 states (p. 2, fn. 2) that that the capital of the Dreyfus broker-dealer Both the Board (in your Section 20 orders) and the Federal Deposit Insurance Corporation (FDIC) (in 12 C.F.R. section 337.4(b)(3)) have adopted measures to ensure the adequate capitalization of securities subsidiaries and prevent the double-leveraging of securities subsidiaries' capital. Both provide that the parent entity's investment in a securities subsidiary will not be counted toward satisfaction of the parent entity's capital requirement. Please explain the rationale for your position. What would be the consequences of the failure of the OCC to make similar provision for ensuring the separate capitalization of national bank subsidiaries? What capital conditions should the OCC require in connection with the proposed transaction? Please comment on the OCC's statement (p. 6) that "[b]ecause establishment of operating subsidiaries is part of the business of banking, it is not proscribed by 12 U.S.C. section 24 (7) provisions on purchasing corporate stock." Please explain how you distinguish between "incidental" activities and those "closely related to banking," which are subject to the requirements of the Bank Holding Company Act. a. Please provide the Subcommittee with a list or chart comparing those activities that the OCC has deemed |