[Federal Register Volume 60, Number 183 (Thursday, September 21, 1995)]
[Notices]
[Pages 48993-48995]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23369]
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[[Page 48994]]
FEDERAL RESERVE SYSTEM
The Bessemer Group, Incorporated; Notice to Engage in Certain
Nonbanking Activities
The Bessemer Group, Incorporated, Woodbridge, New Jersey
(Notificant), has provided notice pursuant to section 4(c)(8) of the
Bank Holding Company Act (12 USC 1843(c)(8)) (BHC Act) and section
225.23 of the Board's Regulation Y (12 CFR 225.23), to establish a
wholly owned de novo subsidiary, Bessemer Asset Management, Inc., New
York, New York (Company), that would establish and control one or more
limited partnerships (Partnerships), including Old Westbury Investment
Partners, L.P., New York, New York. Company would serve as the sole
general partner of the Partnerships and would provide administrative
services to the Partnerships. In order to serve as the general partner
of the Partnerships, Company would register with the Commodity Futures
Trading Commission as a commodity pool operator (CPO). Company would
engage unaffiliated asset managers to manage the investment portfolios
of the Partnerships, and the limited partnership interests in the
Partnerships would be privately placed with institutional customers by
Notificant's subsidiary banks and a broker-dealer subsidiary of one of
Notificant's subsidiary banks. Directors, officers and employees of
Notificant's subsidiary banks and trust companies may serve as
directors and officers of Company. However, directors of Notificant's
subsidiary banks and trust companies would not be engaged in the
management or performance of Company's day-to-day operations.
Notificant proposes that the Partnerships be permitted to invest in the
following instruments:
1. U.S. government and agency securities and other securities in
which national banks may invest;
2. All types of debt and equity securities;
3. Loan participations;
4. Foreign exchange and interest rate contracts, including spot,
forward, swap, futures, options, and options on futures contracts;
5. Money market instruments and commercial paper;
6. options, swaps, futures and options on futures on financial
assets and indices, including securities and bond indices;
7. Gold and silver coin, bar, round and bullion, as well as spot,
forward, futures, options, and options on futures contracts on such
metals;
8. Futures and options on futures contracts on a wide variety of
non-financial commodities;
9. Distressed debt securities, including debt securities of an
issuer that are in default, bankruptcy, receivership, or subject to an
assignment for the benefit of creditors; and
10. Platinum and palladium coin, bar, round and bullion, as well as
spot, forward, futures, options and options on futures contracts on
these metals.Notificant has stated that the Partnerships may establish
wholly owned subsidiaries to hold certain assets, instruments and
contracts. The proposed activities are to be conducted throughout the
United States.
Section 4(c)(8) of the BHC Act provides that a bank holding company
may, with Board approval, engage in any activity ``which the Board,
after due notice and opportunity for hearing, has determined (by order
or regulation) to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto''. In determining
whether a proposed activity is closely related to banking for purposes
of the BHC Act, the Board considers, inter alia, the matters set forth
in National Courier Association v. Board of Governors of the Federal
Reserve System, 516 F.2d 1229 (D.C. Cir. 1975). These considerations
are
1. Whether banks generally have in fact provided the proposed
services,
2. Whether banks generally provide services that are operationally
or functionally so similar to the proposed services as to equip them
particularly well to provide the proposed services, and
3. Whether banks generally provide services that are so integrally
related to the proposed services as to require their provision in a
specialized form. See 516 F.2d at 1237. In addition, the Board may
consider any other basis that may demonstrate that the activity has a
reasonable or close relationship to banking or managing or controlling
banks. Board Statement Regarding Regulation Y, 49 FR 806 (1984).
Notificant maintains that the Board previously has permitted a bank
holding company to organize, act as the general partner of, and provide
administrative services to limited partnerships whose interests are not
registered under the Securities Act of 1933. See Meridian Bancorp,
Inc., 80 Federal Reserve Bulletin 736 (1994) (Meridian). Notificant
also maintains that the proposed activities of the Partnerships, which
include investing in instruments that were not considered in Meridian,
are operationally and functionally similar to the investment portfolio
services that Notificant's subsidiary trust companies perform for their
customers.
Notificant states that the limited partnerships involved in
Meridian were permitted to invest in the instruments listed in
paragraphs 1 and 2. Notificant also states that the Board has permitted
bank holding companies to invest for their own accounts in most of the
instruments listed in paragraphs 3 through 8. See 12 CFR 225.25(b)(1)
(acquiring participations in loans); The Hongkong and Shanghai Banking
Corporation, 75 Federal Reserve Bulletin 217 (1989) (trading foreign
exchange); The Hongkong and Shanghai Banking Corporation, 72 Federal
Reserve Bulletin 345 (1986), Westpac Banking Corporation, 73 Federal
Reserve Bulletin 61 (1987), and Swiss Bank Corporation, 81 Federal
Reserve Bulletin 185 (1995) (Swiss Bank) (trading money market
instruments, interest rate contracts, gold, silver, contracts on
certain financial assets and indices, and contracts on non-financial
commodities and indices). Notificant maintains that the Office of the
Comptroller of the Currency (OCC) has permitted national banks to
purchase and sell for hedging purposes those instruments listed in
paragraphs 6 through 8 that the Board has not permitted bank holding
companies to trade. For this reason, Notificant states that these
activities are functionally and operationally so similar to activities
conducted by banks that banking organizations are particularly well
equipped to engage in the proposed activities.
The Board has not previously permitted a bank holding company to
act as a CPO. Notificant contends that this activity is similar to
organizing, and acting as the general partner of, a closed-end
investment company or an unregistered limited partnership. See Meridian
and 12 CFR 225.24(b)(4). Notificant also notes that the OCC has
permitted a national bank to act as a CPO under certain circumstances.
See OCC Interpretive letter No. 496 (December 18, 1989).
Notificant believes that investing in the instruments and
commodities listed in paragraphs 9 and 10 is closely related to
banking. Notificant maintains that investing in distressed debt is
within the scope of a bank holding company's authority to acquire non-
controlling positions in the securities of any issuer. In this regard,
Notificant has made certain commitments in its notice, including that
the Partnerships would not acquire quantities of distressed debt that
are reasonably likely to result in the Partnerships acquiring more than
5
[[Page 48995]]
percent of the voting securities of the obligor. In addition,
Notificant maintains that investing in platinum and palladium is
closely related to banking. Notificant states that since the Board's
denial of an application by a bank holding company to deal in platinum
and palladium, Standard and Chartered Banking Group, Ltd., 38 FR 27,552
(1973), the Board has permitted bank holding companies, under
Regulation K, to trade these metals. See Republic National Bank of New
York, 80 Federal Reserve Bulletin 177 (1994); J.P. Morgan & Company,
Inc., 76 Federal Reserve Bulletin 552 (1990). The Board also has
permitted a bank holding company, under Regulation Y, to trade platinum
coin, bullion and futures. See Swiss Bank. Notificant maintains that
based on these orders, and in light of the precious metals activities
currently conducted by banks, the proposed activities are functionally
and operationally so similar to activities conducted by banks that
banking organizations are particularly well equipped to engage in the
proposed activities.
In order to approve the proposal, the Board must determine that the
proposed activities ``can reasonably be expected to produce benefits to
the public, such as greater convenience, increased competition, or
gains in efficiency, that outweigh possible adverse effects, such as
undue concentration of resources, decreased or unfair competition,
conflicts of interest, or unsound banking practices.'' 12 U.S.C.
1843(c)(8).
Notificant believes that the proposed activities would produce
public benefits that outweigh any potential adverse effects. These
public benefits include increased competition and greater convenience
to Notificant's customers. In addition, Notificant indicates that the
proposed activities, in light of Notificant's proposed safeguards and
the commitments made by Notificant, would not result in adverse effects
such as an undue concentration of resources, decreased or unfair
competition, conflicts of interests, or unsound banking practices.
In publishing the proposal for comment, the Board does not take a
position on issues raised by the proposal. Notice of the proposal is
published solely to seek the views of interested persons on the issues
presented by the notice and does not represent a determination by the
Board that the proposal meets, or is likely to meet, the standards of
the BHC Act.
Any comments or requests for hearing should be submitted in writing
and received by William W. Wiles, Secretary, Board of Governors of the
Federal Reserve System, Washington, D.C. 20551, not later than October
19, 1995. Any request for a hearing on this notice must, as required by
section 262.3(e) of the Board's Rules of Procedure (12 C.F.R.
262.3(e)), be accompanied by a statement of the reasons why a written
presentation would not suffice in lieu of a hearing, identifying
specifically any questions of fact that are in dispute, summarizing the
evidence that would be presented at a hearing, and indicating how the
party commenting would be aggrieved by approval of the proposal.
The notice may be inspected at the offices of the Board of
Governors or the Federal Reserve Bank of New York.
Board of Governors of the Federal Reserve System. September 14,
1995.
William W. Wiles,
Secretary of the Board
[FR Doc. 95-23369 Filed 9-20-95; 8:45 am]
BILLING CODE 6210-01-F
