IX. Compliance and Control A. Sales of and recommendations to purchase mutual fund shares will meet or exceed all applicable legal, regulatory and self-regulatory standards including, where applicable, the NASD Rules of Fair Practice. Applicable areas of the Mellon Companies will incorporate structures, procedures and mechanisms designed to ensure compliance with these standards and the Mellon Companies' own rules. The compliance functions In the Mellon Companies will be performed independently of investment product sales and management. B. The Mellon Companies will utilize compliance procedures with respect to suitability determinations such as requiring recorded documentation by all representatives making recommendations on mutual funds, requiring a senior representative to sign off on such documentation and requiring that specially designated compliance officers sample such documentation on a periodic basis. C. The Mellon Companies will utilize compliance procedures which include a system to monitor customer complaints. D. Mellon Company employees with responsibility for the review of sales of shares of mutual funds and compliance with this Policy Statement will receive dedicated training designed to ensure their ability to perform their functions consistently with this Policy Statement and its objectives. E. The Board of Directors of Mellon Bank Corporation will oversee Mellon's investment services and will adopt and review policies to ensure that these activities are carried out in compliance with all applicable laws and regulations and with this Policy Statement. The Board of Directors of Mellon Bank Corporation will formally approve this Policy Statement, and no material changes in this Policy Statement will be made without the approval of such board. Congress of the United States Mashington, DC 20515 December 20, 1993 The Honorable Arthur Levitt, Jr. Securities and Exchange Commission Dear Chairman Levitt: Pursuant to Rules X and XI of the Rules of the U.S. House of Representatives, and our continuing oversight, respectively, of banks and banking, including deposit insurance, and of securities and exchanges, we are looking into the facts and circumstances surrounding the proposed merger between Mellon Bank Corporation and The Dreyfus Corporation, particularly the significant legal, regulatory, and public policy issues that are raised thereby (see enclosed correspondence). In order to assist us in this matter, we respectfully request that your agency provide us by the close of business on Friday, January 7, 1994, an analysis of the issues that the proposed transaction and resultant structure raise under the federal securities laws. At a minimum, your analysis should include the following: 1. 2. Analysis of the potential conflicts of interests that may be raised in connection Corporation. Analysis of the potential conflicts of advisory functions of The Dreyfus Corporation The Honorable Arthur Levitt, Jr. 3. Assuming different scenarios as to the manner examination and review to ensure compliance The question whether, as a result of or in additional legislation is needed or desirable regulatory functions or otherwise to provide offered by or through The Dreyfus Corporation or Mellon Bank Corporation. Thank you for your cooperation and attention to our request. Heway Sugeles Henry B. Gonzale Chairman Sincerely, on Banking, Finance and Urban Affairs John D. Dingell Committee on Energy Dear Chairman Dingell and Chairman Gonzalez: In your letter to us dated December 20, 1993, you asked for our analysis of a number of legal issues arising under the federal securities laws in connection with the proposed merger of Mellon Bank Corporation and the Dreyfus Corporation. In response to your request, I asked the Commission's Division of Investment Management and the Office of General Counsel to prepare the enclosed memorandum. The Mellon/Dreyfus merger underscores the need for legislation that would provide for the functional regulation of securities activities. We believe that all financial institutions that engage in securities activities should be required to comply with the federal securities laws and regulations, and we therefore strongly support legislation sponsored by Chairmen Dingell and Markey and Congressmen Moorhead and Fields, H.R. 3447. We share the concerns you both have raised recently regarding investor confusion about mutual funds advised or sold by banks and their affiliates, and we commend Chairman Gonzalez for calling attention to this issue in H.R. 3306. We believe that the potential for that type of confusion on the part of Mellon and Dreyfus customers after completion of the proposed merger will be great in the absence of protective measures taken by both Mellon and Dreyfus. We will continue to work closely with our banking regulator counterparts to ensure that Mellon and Dreyfus take steps to address our concerns. I hope this memorandum satisfactorily responds to the questions you raised about the merger. If you have any further questions regarding the issues raised in your letter, please contact me, Barry Barbash, Director of the Division of Investment Management, or Simon Lorne, General Counsel. Enclosure Sincerely, Arthur Levitt |