For immediate release

The Federal Reserve Board today announced its approval of the notice filed by Unidanmark A/S and Unibank A/S, both of Copenhagen, Denmark, to retain their interest in Aros Securities, Inc., New York, New York, and thereby engage in investment advisory, securities brokerage, private placement, and "riskless principal" activities. A copy of the Board's Order is attached.

Unidanmark A/S Unibank A/S Copenhagen, Denmark Order Approving Notice to Engage in Nonbanking Activities

Unidanmark A/S and its wholly owned subsidiary Unibank A/S, both of Copenhagen, Denmark (collectively, "Notificants"), foreign banking organizations subject to the provisions of the Bank Holding Company Act ("BHC Act"), have requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. � 1843(c)(8)) and section 225.23 of the Board's Regulation Y (12 C.F.R. 225.23) to retain their ownership of 100 percent of the voting shares of Aros Securities Inc., New York, New York ("Aros"),1 and thereby engage in the following activities: (1) providing investment advisory services pursuant to 12 C.F.R. 225.25(b)(4); (2) providing discount and full-service securities brokerage services pursuant to 12 C.F.R. 225.25(b)(15); and (3) acting as agent in the private placement of all types of securities, and buying and selling all types of securities on the order of customers as a "riskless principal" through Company.2 Aros is registered as a broker-dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (15 U.S.C. � 78a et seq.) and is a member of the National Association of Securities Dealers ("NASD"). Accordingly, Aros is subject to the recordkeeping and reporting obligations, fiduciary standards, and other requirements of the Securities Exchange Act of 1934, the SEC and the NASD. Notice of this proposal, affording interested persons an opportunity to submit comments, has been published (61 Federal Register 56,961 (1996)). The time for filing comments has expired, and the Board has considered the notice and all comments received in light of the factors set forth in section 4(c)(8) of the BHC Act. Unidanmark A/S, with total consolidated assets of approximately $45.9 billion, is the second largest banking organization in Denmark.3 In the United States, Unibank A/S operates a branch in New York, New York. Return to top Activities Approved by Regulation The Board previously has determined by regulation that the proposed investment advisory and securities brokerage activities are closely related to banking for purposes of section 4(c)(8) of the BHC Act.4 Notificants propose to conduct the activities in accordance with the Board's regulations and prior Board decisions relating to the activities. Private Placement and "Riskless Principal" Activities Private placement involves the placement of new issues of securities with a limited number of sophisticated purchasers in a nonpublic offering. A financial intermediary in a private placement transaction acts solely as an agent of the issuer in soliciting purchasers and does not purchase the securities and attempt to resell them. Securities that are privately placed are not subject to the registration requirements of the Securities Act of 1933, and are offered only to financially sophisticated institutions and individuals and not to the public. Aros will not privately place registered securities and will only place securities with customers that qualify as accredited investors. "Riskless principal" is the term used in the securities business to refer to a transaction in which a broker-dealer, after receiving an order to buy (or sell) a security for a customer, purchases (or sells) the security for its own account to offset a contemporaneous sale to (or purchase from) the customer.5 Riskless principal transactions are understood in the industry to include only transactions in the secondary market. Thus, Aros would not act as a riskless principal in selling bank-ineligible securities at the order of a customer that is the issuer of the securities to be sold, or in any transaction where Aros has a contractual agreement to place the securities as agent of the issuer.6 Aros also would not act as a riskless principal in any transaction involving a bank-ineligible security for which it or an affiliate makes a market. The Board has determined that, subject to the limitations established by the Board in prior orders, the proposed private placement and riskless principal activities are so closely related to banking as to be a proper incident thereto within the meaning of section 4(c)(8) of the BHC Act.7 The Board also has determined that acting as agent in the private placement of securities, and purchasing and selling securities on the order of investors as a riskless principal, do not constitute underwriting and dealing in securities for purposes of section 20 of the Glass-Steagall Act, and that revenue derived from these activities is not subject to the 10-percent revenue limitation on bank-ineligible securities underwriting and dealing.8 Notificants have committed that Aros will conduct its private placement activities using the same methods and procedures and subject to the same prudential limitations as those established by the Board in Bankers Trust and J.P. Morgan,9 including the comprehensive framework of restrictions imposed by the Board in connection with underwriting and dealing in bank-ineligible securities, which were designed to avoid potential conflicts of interests, unsound banking practices, and other adverse effects. Notificants also have committed that Aros will conduct its riskless principal activities subject to the limitations previously established by the Board.10 Return to top Financial Factors, Managerial Resources, and Other Considerations Under the proper incident to banking standard of section 4(c)(8) of the BHC Act, in order to approve this notice, the Board must determine that the performance of the proposed activities by Notificants can reasonably be expected to produce public benefits that would outweigh possible adverse effects. As part of the Board's evaluation of these factors, the Board considers the financial and managerial resources of the notificants and their subsidiaries and the effect the transaction would have on such resources.11 The Board notes that Notificants' capital ratios satisfy applicable risk-based standards under the Basle Accord, and are considered equivalent to the capital levels that would be required of a United States banking organization. Based on all the facts of record, the Board concludes that financial and managerial factors are consistent with approval of the proposal. There is no evidence in the record indicating that consummation of this proposal is likely to result in significantly adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices. The Board expects, moreover, that consummation of the proposal would provide added convenience to Notificants' customers and would increase the level of competition among existing providers of these services. The Board has determined, therefore, that the performance of the proposed activities by Notificants can reasonably be expected to produce public benefits that outweigh possible adverse effects under the proper incident to banking standard of section 4(c)(8) of the BHC Act. Based on the foregoing and all the facts of record, including the commitments discussed in this order and all other commitments and representations made by Notificants in connection with this notice, and subject to the terms and conditions set forth in this order, the Board has determined that the notice should be, and hereby is, approved. The Board's determination is subject to all the conditions set forth in Regulation Y, including those in sections 225.7 and 225.23(g) of Regulation Y (12 C.F.R. 225.7 and 225.23(g)), and to the Board's authority to require modification or termination of the activities of a bank holding company or any of its subsidiaries as the Board finds necessary to assure compliance with, and to prevent evasion of, the provisions of the BHC Act and the Board's regulations and orders issued thereunder. The Board's decision is specifically conditioned on Notificants' compliance with the commitments and representations made in connection with this notice, including the commitments and conditions discussed in this order. The commitments, representations, and conditions relied on in reaching this decision shall be deemed to be conditions imposed in writing by the Board in connection with its findings and decision and may be enforced in proceedings under applicable law. This transaction shall not be consummated later than three months after the effective date of this order, unless such period is extended for good cause by the Board or the Federal Reserve Bank of New York, acting pursuant to delegated authority.

By order of the Board of Governors,12 December 16, 1996. Jennifer J. Johnson Deputy Secretary of the Board

Return to top Footnotes 1 Notificants previously received approval under section 4(c)(9) of the BHC Act to retain temporarily their ownership interest in Aros. See Letter dated August 14, 1996, from Jennifer J. Johnson, Deputy Secretary of the Board, to Robert L. Tortoriello, Esq. ("4(c)(9) Approval Letter"). 2 Aros also engages in certain securities underwriting and dealing activities. Pursuant to the 4(c)(9) Approval Letter, Aros must discontinue such activities within six months of the date on which Notificants acquired control of Aros. 3 Asset and ranking data are as of December 31, 1995, and use exchange rates then in effect. 4 See 12 C.F.R. 225.25(b)(4) and (15). 5 See SEC Rule 10b-10(a)(8)(i) (17 C.F.R. 240.10b-10(a)(8)(i)). The Board notes that Aros, as a registered broker-dealer, must conduct its riskless principal activities in accordance with the customer disclosure and other requirements of the federal securities laws. 6 "Bank-ineligible securities" refers to securities that state member banks are not authorized to underwrite or deal in under 12 U.S.C. �� 335 and 24(7). 7 See J.P. Morgan & Company Incorporated, 76 Federal Reserve Bulletin 26 (1990) ("J.P. Morgan"); Bankers Trust New York Corporation, 75 Federal Reserve Bulletin 829 (1989) ("Bankers Trust"). 8 See Bankers Trust. 9 Among the prudential limitations discussed more fully in Bankers Trust and J.P. Morgan are that Aros will not privately place open-end investment company securities or securities of investment companies that are advised by Notificants or any of their affiliates. In addition, Aros will make no general solicitation or general advertising for securities it places. 10 See The Bank of New York Company, Inc., 82 Federal Reserve Bulletin 748 (1996). Neither Aros nor its affiliates will hold themselves out as making a market in the bank-ineligible securities that Aros buys and sells as riskless principal, or enter quotes for specific bank-ineligible securities in any dealer quotation system in connection with Aros' riskless principal transactions, except that Aros and its affiliates may enter bid or ask quotations, or publish "offering wanted" or "bid wanted" notices on trading systems other than NASDAQ or an exchange, if Aros or the affiliate does not enter price quotations on different sides of the market for a particular security for two business days. In other words, Aros or its affiliate must wait at least two business days after entering a "bid" quote on a security before entering an "ask" quote on the same security and vice versa. Aros will not act as riskless principal for registered investment company securities or for any securities of investment companies that are advised by Notificants or their affiliates. In addition, because Aros proposes to provide riskless principal services in combination with investment advisory services, Aros will conduct its riskless principal activities in accordance with the limitations established by the Board for the full-service brokerage activities of bank holding companies. See 12 C.F.R. 225.25(b)(15)(ii). 11 See 12 C.F.R. 225.24; see also The Fuji Bank, Limited, 75 Federal Reserve Bulletin 94 (1989); Bayerische Vereinsbank AG, 73 Federal Reserve Bulletin 155 (1987). 12 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, Lindsey, Phillips, Yellen, and Meyer.

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1996 Orders on banking applications