Section 20 Subsidiaries of Bank Holding Companies
April 17, 1998
Circular No. 11049

Clarification of Customer Disclosure Operating Standard

To All Section 20 Subsidiaries of Bank Holding Companies,
and Others Concerned, in the Second Federal Reserve District:

The following is from a statement issued by the Board of Governors of the Federal Reserve System:

The Federal Reserve Board has announced a clarification of the operating standard relating to customer disclosures of section 20 subsidiaries of bank holding companies.

The clarification is effective March 27, 1998. The Board is modifying the customer disclosure operating standard to make clear that a section 20 subsidiary operating off bank premises may satisfy the standard by providing a one-time disclosure in writing when an investment account is opened.

The clarification requires section 20 subsidiaries to provide to each of its retail customers, in writing, at the time an investment account is opened, the same minimum disclosures, and to obtain the same customer acknowledgment, as described in the Interagency Statement on Retail Sales of Nondeposit Investment Products.

This clarification will relieve section 20 subsidiaries operating off the premises of depository institutions from providing oral disclosures to retail customers on a continuing basis. An amendment to the Board's Regulation Y, "Bank Holding Companies and Change in Bank Control," as published in the Federal Register of March 27 is available as a file (pdf - 20kb), giving effect to the Board's action. Questions on this matter may be directed, at this Bank, to Jim Keogh, Examining Officer, Advisory and Technical Services.