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9 Cards in this Set
- Front
- Back
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What is the Federal Reserve Act Section 23B? |
Restrictions on Transactions with Affiliates
Similar to 23A but banks are not affiliates for 23B
23B also adds the following:
• transactions S/B on similar terms (as those of non-affiliate transactions)
• restrictions on purchasing securities in a fiduciary capacity from an affiliate
• restrict the purchasing of securities from an affiliate that is an underwriter of the securities
• prohibits agreement & advertising or suggesting the bank is responsible for the obligations of its affiliates |
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What transactions may a bank & its subsidiaries engage in? |
A. On terms & under circumstances, including credit standards, that are substantially the same, or at least as favorable to the bank or its subsidiary, as those prevalent at the time for comparable transactions with or involving other nonaffiliated companies
Or
B. In the absence of comparable transactions, or terms & under circumstances, including credit standards, that in good faith would be offered to, or would apply to, nonaffiliated companies.?sect |
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Section 23B covered transactions? |
• any covered transaction with an affiliate
• the sale of securities to an affiliate, including assets subject to an agreement to repurchase
• the payment if money or the furnishings of service to an affiliate under contract, lease, or otherwise
• any transaction in which an affiliate acts as an agent or broker or receives a fee for its services to the bank or any other person
• any transaction or series if transactions with a 3rd party: —if an affiliate has a financial interest in the 3rd Party —if an affiliate is a participant in such transaction or series of transactions
• transactions that benefit an affiliate...if any of the proceeds of the transaction are used for the benefit of, or transferred to, the affiliate. |
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23B prohibited transactions? |
• bank or subsidiary shall not purchase as fiduciary any securities or other assets from any affiliate unless the purchase is permitted: —under the instrument creating the transaction —by court order —by law if the jurisdiction governing the fiduciary relationship
&
Whether acting as principal or fiduciary, shall not knowingly purchase or acquire, during the existence of any underwriting or selling syndicate, any security if a principal underwriter of that security is an affiliate of the bank. |
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23B prohibited transactions? |
• bank or subsidiary shall not purchase as fiduciary any securities or other assets from any affiliate unless the purchase is permitted: —under the instrument creating the transaction —by court order —by law if the jurisdiction governing the fiduciary relationship
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Whether acting as principal or fiduciary, shall not knowingly purchase or acquire, during the existence of any underwriting or selling syndicate, any security if a principal underwriter of that security is an affiliate of the bank. |
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What is the advertising restriction of Section 23B |
A bank, subsidiary of a bank, or an affiliate of a bank shall not publish any advertisement or enter into any agreement stating or suggesting that the bank shall in any way be responsible for the obligations of its affiliates |
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When is a nonbank subsidiary considered an affiliate? |
In the event that the nonbank subsidiary qualifies as a financial subsidiary. |
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A sale-lease back transaction was made by director of the bank.
The director of bank obtained a loan for the building from a non-affiliate bank. The director charges $12 per square foot but the market charges $10 . Does this constitute a 23B violation? |
NO! Constitutes insider dealing/improper transaction/self-dealing |
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A bank gives a unsecured large letter of credit to bank B. Both banks are owned by a BHC 100% and 70%, respectively. LOC issued with no fee charged and for 7 years. Normally the bank charges a fee and renews annually. Is this a violation 23B? |
No. Because banks are not affiliates for 23B purposes |
