Securities Activities of Banks in the GLB Era - Cleary Gottlieb Steen ...

incurring fiduciary obligations, additional restrictions on informationsharing,
etc., can be addressed. 30
4. Focus on compliance with restrictions on affiliate transactions, in
particular, under Sections 23A and 23B of the Federal Reserve Act
and the Board’s Regulation W. 31
a. Sections 23A/23B are the main constraint on transactions
between FHC/BHC securities firms and their bank affiliates.
As the activities of non-bank subsidiaries have expanded, and
30 See, e.g., FSA 2005 Letter, which sets out the FSA’s view of the characteristics of a
“well-managed firm” in respect of conflict of interest concerns, including the
following:
(i) the firm has an up-to-date view of the totality of the types of conflicts of
interest involved in its business activities;
(ii) the firm reviews on a regular basis the types of mitigation it considers
acceptable to address conflict risks;
(iii) the firm has a conflict architecture that can deliver the mitigation resulting
from the review process;
(iv) senior management is involved in the process overall;
(v) senior management is provided reports as to the extent and mitigation of
conflicts of interest;
(vi) the culture of the firm supports effective management of conflicts of interest;
and
(vii) the conflict architecture results in a process that may be made subject to
independent review.
See also Part II. D.12.b.(i) below.
31 12 U.S.C. §§ 371c, 371c-1 (“Sections 23A/23B”); 12 C.F.R. Part 223. See Bank
Activities Guide at Part III.A.6.
55