FINAL RULE ON MERCHANT BANKING ACTIVITIES.The Board of Governors of the Federal Reserve System Board of Governors of the Federal Reserve System The managing body of the Federal Reserve System, which sets policies on bank practices and the money supply. and the Secretary of the Treasury on January 10, 2001, approved a joint final rule governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. the merchant banking activities of financial holding companies. The rule, effective February 15, 2001, implements provisions of the Gramm-Leach-Bliley Act The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub. L. No. 106-102, 113 Stat. 1338 (November 12, 1999), is an Act of the United States Congress which repealed the Glass-Steagall Act, opening up competition . The Board and the Secretary believe it permits a "two-way street" between securities firms and banking organizations, while, at the same time, giving effect to the statutory limitations and framework adopted by the Congress to help maintain the separation of banking and commerce and ensure the safety and soundness of depository institutions Depository institution A financial institution that obtains its funds mainly through deposits from the public. This includes commercial banks, savings and loan associations, savings banks and credit unions. . The final rule incorporates a number of amendments in response to public comments on the interim rule issued March 17, 2000. These changes include the following: * Modifying the provisions defining when a financial holding company routinely manages or operates a portfolio company * Eliminating the dollar-based threshold for the review of a financial holding company's merchant banking activities and adopting a sunset provision A statutory provision providing that a particular agency, benefit, or law will expire on a particular date, unless it is reauthorized by the legislature. Federal and state governments grew dramatically in the 1950s and 1960s. for the remaining capital-based investment threshold * Streamlining the rule's reporting and recordkeeping requirements * Broadening the definition of "private equity funds" and clarifying the rule's application to such funds * Modifying when transactions between insured depository institutions and portfolio companies are subject to sections 23A and 23B of the Federal Reserve Act * Revising the restrictions that apply to merchant banking investments held beyond the permissible per·mis·si·ble adj. Permitted; allowable: permissible tax deductions; permissible behavior in school. per·mis holding period * Expanding the definition of "securities affiliate" to include a department or division of a bank registered as a municipal securities dealer. |
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