SIFMA Submits Comments to Federal Reserve Regarding Proposed Rules on Concentration Limits on Large Financial Companies

SIFMA submitted comments to the Board of Governors of the Federal Reserve System ("FRB") regarding proposed Regulation XX, which involves concentration limits on large financial companies.

Regulation XX will implement Section 14 of the Bank Holding Company Act, which was added by Section 622 of Dodd-Frank. Section 14 provides that a financial company may not engage in a "covered acquisition" of another financial company if the total liabilities of the acquiring company would, following the acquisition, exceed 10% of the aggregate liabilities of all financial companies. The FRB's proposed rule would prohibit such acquisitions, but would also permit "an acquisition of securities or other assets in good faith in a fiduciary capacity if the securities or assets are held in the ordinary course of business and not acquired for the benefit of the company or its shareholders, employees, or subsidiaries."

In its comment letter, SIFMA argues that this carve-out is too qualified, and that the FRB should flatly carve out any acquisition by a financial company acting in a fiduciary or other non-principal capacity. SIFMA argues further that this carve-out should apply regardless of whether the acquiring company has sole discretionary voting authority over the acquired shares, and points out that assets acquired in a fiduciary capacity would not be treated as balance sheet assets of the fiduciary; therefore, they should not affect the fiduciary's liabilities for the purposes of Regulation XX.

See: Comment Letter.See also: FRB Rule Proposal (79 FR 27801).