12 CFR 225.86 – What activities are permissible for any financial holding company?
The following activities are financial in nature or incidental to a financial activity:
(a) Activities determined to be closely related to banking. (1) Any activity that the Board had determined by regulation prior to November 12, 1999, to be so closely related to banking as to be a proper incident thereto, subject to the terms and conditions contained in this part, unless modified by the Board. These activities are listed in § 225.28.
(2) Any activity that the Board had determined by an order that was in effect on November 12, 1999, to be so closely related to banking as to be a proper incident thereto, subject to the terms and conditions contained in this part and those in the authorizing orders. These activities are:
(i) Providing administrative and other services to mutual funds (Societe Generale, 84 Federal Reserve Bulletin 680 (1998));
(ii) Owning shares of a securities exchange (J.P. Morgan & Co, Inc., and UBS AG, 86 Federal Reserve Bulletin 61 (2000));
(iii) Acting as a certification authority for digital signatures and authenticating the identity of persons conducting financial and nonfinancial transactions (Bayerische Hypo- und Vereinsbank AG, et al., 86 Federal Reserve Bulletin 56 (2000));
(iv) Providing employment histories to third parties for use in making credit decisions and to depository institutions and their affiliates for use in the ordinary course of business (Norwest Corporation, 81 Federal Reserve Bulletin 732 (1995));
(v) Check cashing and wire transmission services (Midland Bank, PLC, 76 Federal Reserve Bulletin 860 (1990) (check cashing); Norwest Corporation, 81 Federal Reserve Bulletin 1130 (1995) (money transmission));
(vi) In connection with offering banking services, providing notary public services, selling postage stamps and postage-paid envelopes, providing vehicle registration services, and selling public transportation tickets and tokens (Popular, Inc., 84 Federal Reserve Bulletin 481 (1998)); and
(vii) Real estate title abstracting (The First National Company, 81 Federal Reserve Bulletin 805 (1995)).
(b) Activities determined to be usual in connection with the transaction of banking abroad. Any activity that the Board had determined by regulation in effect on November 11, 1999, to be usual in connection with the transaction of banking or other financial operations abroad (see § 211.5(d) of this chapter), subject to the terms and conditions in part 211 and Board interpretations in effect on that date regarding the scope and conduct of the activity. In addition to the activities listed in paragraphs (a) and (c) of this section, these activities are:
(1) Providing management consulting services, including to any person with respect to nonfinancial matters, so long as the management consulting services are advisory and do not allow the financial holding company to control the person to which the services are provided;
(2) Operating a travel agency in connection with financial services offered by the financial holding company or others; and
(3) Organizing, sponsoring, and managing a mutual fund, so long as:
(i) The fund does not exercise managerial control over the entities in which the fund invests; and
(ii) The financial holding company reduces its ownership in the fund, if any, to less than 25 percent of the equity of the fund within one year of sponsoring the fund or such additional period as the Board permits.
(c) Activities permitted under section 4(k)(4) of the BHC Act (12 U.S.C. § 1843(k)(4)). Any activity defined to be financial in nature under sections 4(k)(4)(A) through (E), (H) and (I) of the BHC Act (12 U.S.C. § 1843(k)(4)(A) through (E), (H) and (I)).
(d) Activities determined to be financial in nature or incidental to financial activities by the Board—(1) Acting as a finder—Acting as a finder in bringing together one or more buyers and sellers of any product or service for transactions that the parties themselves negotiate and consummate.
(i) What is the scope of finder activities? Acting as a finder includes providing any or all of the following services through any means—
(A) Identifying potential parties, making inquiries as to interest, introducing and referring potential parties to each other, and arranging contacts between and meetings of interested parties;
(B) Conveying between interested parties expressions of interest, bids, offers, orders and confirmations relating to a transaction; and
(C) Transmitting information concerning products and services to potential parties in connection with the activities described in paragraphs (d)(1)(i)(A) and (B) of this section.
(ii) What are some examples of finder services? The following are examples of the services that may be provided by a finder when done in accordance with paragraphs (d)(1)(iii) and (iv) of this section. These examples are not exclusive.
(A) Hosting an electronic marketplace on the financial holding company’s Internet web site by providing hypertext or similar links to the web sites of third party buyers or sellers.
(B) Hosting on the financial holding company’s servers the Internet web site of—
(1) A buyer (or seller) that provides information concerning the buyer (or seller) and the products or services it seeks to buy (or sell) and allows sellers (or buyers) to submit expressions of interest, bids, offers, orders and confirmations relating to such products or services; or
(2) A government or government agency that provides information concerning the services or benefits made available by the government or government agency, assists persons in completing applications to receive such services or benefits from the government or agency, and allows persons to transmit their applications for services or benefits to the government or agency.
(C) Operating an Internet web site that allows multiple buyers and sellers to exchange information concerning the products and services that they are willing to purchase or sell, locate potential counterparties for transactions, aggregate orders for goods or services with those made by other parties, and enter into transactions between themselves.
(D) Operating a telephone call center that provides permissible finder services.
(iii) What limitations are applicable to a financial holding company acting as a finder? (A) A finder may act only as an intermediary between a buyer and a seller.
(B) A finder may not bind any buyer or seller to the terms of a specific transaction or negotiate the terms of a specific transaction on behalf of a buyer or seller, except that a finder may—
(1) Arrange for buyers to receive preferred terms from sellers so long as the terms are not negotiated as part of any individual transaction, are provided generally to customers or broad categories of customers, and are made available by the seller (and not by the financial holding company); and
(2) Establish rules of general applicability governing the use and operation of the finder service, including rules that—
(i) Govern the submission of bids and offers by buyers and sellers that use the finder service and the circumstances under which the finder service will match bids and offers submitted by buyers and sellers; and
(ii) Govern the manner in which buyers and sellers may bind themselves to the terms of a specific transaction.
(C) A finder may not—
(1) Take title to or acquire or hold an ownership interest in any product or service offered or sold through the finder service;
(2) Provide distribution services for physical products or services offered or sold through the finder service;
(3) Own or operate any real or personal property that is used for the purpose of manufacturing, storing, transporting, or assembling physical products offered or sold by third parties; or
(4) Own or operate any real or personal property that serves as a physical location for the physical purchase, sale or distribution of products or services offered or sold by third parties.
(D) A finder may not engage in any activity that would require the company to register or obtain a license as a real estate agent or broker under applicable law.
(iv) What disclosures are required? A finder must distinguish the products and services offered by the financial holding company from those offered by a third party through the finder service.
(2) [Reserved]
(e) Activities permitted under section 4(k)(5) of the Bank Holding Company Act (12 U.S.C. § 1843(k)(5)). (1) The following types of activities are financial in nature or incidental to a financial activity when conducted pursuant to a determination by the Board under paragraph (e)(2) of this section:
(i) Lending, exchanging, transferring, investing for others, or safeguarding financial assets other than money or securities;
(ii) Providing any device or other instrumentality for transferring money or other financial assets; and
(iii) Arranging, effecting, or facilitating financial transactions for the account of third parties.
(2) Review of specific activities—(i) Is a specific request required? A financial holding company that wishes to engage on the basis of paragraph (e)(1) of this section in an activity that is not otherwise permissible for a financial holding company must obtain a determination from the Board that the activity is permitted under paragraph (e)(1).
(ii) Consultation with the Secretary of the Treasury. After receiving a request under this section, the Board will provide the Secretary of the Treasury with a copy of the request and consult with the Secretary in accordance with section 4(k)(2)(A) of the Bank Holding Company Act (12 U.S.C. § 1843(k)(2)(A)).
(iii) Board action on requests. After consultation with the Secretary, the Board will promptly make a written determination regarding whether the specific activity described in the request is included in an activity category listed in paragraph (e)(1) of this section and is therefore either financial in nature or incidental to a financial activity.
(3) What factors will the Board consider? In evaluating a request made under this section, the Board will take into account the factors listed in section 4(k)(3) of the BHC Act (12 U.S.C. § 1843(k)(3)) that it must consider when determining whether an activity is financial in nature or incidental to a financial activity.
(4) What information must the request contain? Any request by a financial holding company under this section must be in writing and must:
(i) Identify and define the activity for which the determination is sought, specifically describing what the activity would involve and how the activity would be conducted; and
(ii) Provide information supporting the requested determination, including information regarding how the proposed activity falls into one of the categories listed in paragraph (e)(1) of this section, and any other information required by the Board concerning the proposed activity.