[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]



-----------------------------------------------------------------------

[[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