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Release Date: September 17, 1997

For immediate release

The Federal Reserve Board today announced its approval of the notice by BankAmerica Corporation to acquire Robertson, Stephens & Company Group, LLC, and Robertson, Stephens & Company, Inc., and thereby indirectly acquire both of their subsidiaries and affiliates, all of San Francisco, California.

Attached is the Board's Order relating to this action.

BankAmerica Corporation
San Francisco, California

Order Approving Notice to Engage in Nonbanking Activities

BankAmerica Corporation, San Francisco, California ("BankAmerica"), a bank holding company within the meaning of the Bank Holding Company Act ("BHC Act"), has requested the Board's approval under section 4(c)(8) of the BHC Act (12 U.S.C. § 1843(c)(8)) and section 225.24 of the Board's Regulation Y (12 C.F.R. 225.24) to acquire Robertson, Stephens & Company Group, L.L.C., ("Robertson Group"), Robertson, Stephens & Company, Inc., ("Robertson Stephens Co."), and all of their subsidiaries and affiliates (collectively, "Robertson"), all of San Francisco, California.1 BankAmerica would thereby engage in the following nonbanking activities:

  1. providing financial and investment advisory services, pursuant to section 225.28(b)(6) of Regulation Y (12 C.F.R. 225.28 (b)(6));

  2. providing securities brokerage, private placement, and riskless principal services, pursuant to section 225.28(b)(7)(i), (ii), and (iii) of Regulation Y (12 C.F.R. 225.28(b)(7)(i), (ii), and (iii));

  3. underwriting and dealing in obligations of the United States, general obligations of states and their political subdivisions, and other obligations that state member banks of the Federal Reserve System may be authorized to underwrite and deal in under 12 U.S.C. §§ 24 and 335, pursuant to section 225.28(b)(8) of Regulation Y (12 C.F.R. 225.28(b)(8));

  4. underwriting and dealing, to a limited extent, in all types of debt and equity securities, other than ownership interests in open-end investment companies ("mutual funds");

  5. providing administrative and other services to investment companies, including mutual funds;2

Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 45,255 (1997)). 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.

BankAmerica, with total consolidated assets of $258 billion, is the third largest commercial banking organization in the United States.3 BankAmerica operates five subsidiary banks in 13 states and engages, directly and through its subsidiaries, in a broad range of permissible nonbanking activities in the United States and throughout the world. Robertson, with combined consolidated assets of $455 million, engages worldwide in a broad range of investment advisory, securities brokerage, securities underwriting, and related activities.4

BankAmerica engages through BASI in a wide range of securities activities, including engaging, to a limited extent, in underwriting and dealing in all types of debt and equity securities (other than securities issued by open-end investment companies) in which a state member bank may not underwrite or deal ("bank-ineligible securities").5 BASI is, and will continue to be, a broker-dealer registered with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) and a member of the National Association of Securities Dealers ("NASD"). Accordingly, BASI is, and would remain, subject to the recordkeeping and reporting obligations, fiduciary standards, and other requirements of the Securities Exchange Act of 1934, the SEC, and the NASD.

Activities Previously Approved by the Board
The Board previously has determined by regulation or order that the proposed activities are closely related to banking within the meaning of section 4(c)(8) of the BHC Act and the Board previously has authorized BankAmerica to engage in most of these activities.6 BankAmerica would conduct the activities in accordance with the BankAmerica Order, Regulation Y, and the relevant Board interpretations and orders pertaining to each of the activities.7

Bank-Ineligible Securities Underwriting and Dealing Activities
As noted above, BASI currently is engaged in limited underwriting and dealing activities that the Board previously has determined are permissible under section 20 of the Glass-Steagall Act (12 U.S.C. § 377).8 Robertson Sub also is engaged in underwriting and dealing in securities. The Board has concluded that conduct of securities underwriting and dealing is consistent with section 20, provided that the company derives no more than 25 percent of its total gross revenue from underwriting and dealing in securities over any two-year period.9 BankAmerica has committed that, following acquisition of Robertson, BASI will continue to conduct its bank-ineligible securities underwriting and dealing subject to the 25-percent revenue limitation and the prudential limitations previously established by the Board with respect to bank-ineligible securities underwriting and dealing.10

Other Considerations
In order to approve this notice, the Board must determine that the proposed activities are a proper incident to banking, that is, that the performance of the activities "can reasonably be expected to produce benefits to the public . . . that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices."11

As part of its review of these factors, the Board considered the financial and managerial resources of BankAmerica and its subsidiaries and the effect the transaction would have on such resources.12 The Board also has reviewed the capitalization of BankAmerica and BASI in accordance with the standards set forth in the Section 20 Orders and finds the capitalization of each to be consistent with approval.13 The determination about the capitalization of BASI is based on all the facts of record, including BankAmerica's projections of the volume of BASI's underwriting and dealing activities in bank-ineligible securities.

Effective October 27, 1997, the Board substantially revised the prudential limitations with respect to bank-ineligible securities underwriting and dealing.14 BankAmerica has committed that BASI will conduct its bank-ineligible underwriting and dealing activities subject to the Board's new operating standards on October 27, 1997.

On the basis of its supervisory experience with BankAmerica and BASI, the commitments provided in this case, and the proposed management of BASI, the Board also has determined that BankAmerica and BASI have established policies and procedures to ensure compliance with this order and the Section 20 Orders, including computer, audit, and accounting systems, internal risk management controls, and the necessary operational and managerial infrastructure. The Board also has reviewed other aspects of the managerial resources of the entities involved in this proposal, including the expected effect of this proposal on such resources. On the basis of the foregoing and all the facts of record, the Board has concluded that financial and managerial considerations are consistent with approval of this proposal.

The Board expects that the proposed acquisition would provide added convenience to customers of BankAmerica and Robertson, including Robertson's current mutual fund clients. The Board previously has determined that the provision of advisory and administrative services to mutual funds within certain parameters is not likely to result in the types of subtle hazards at which the Glass-Steagall Act is aimed or in any other adverse effects. As required by the Board's regulations, for example, BankAmerica would provide to its customers disclosures designed to alert them to the relationships between BankAmerica and the Funds. These disclosures include those required by the Board's interpretive rule on investment advisory activities to address conflicts of interests that may be presented by the relationship between BankAmerica and the Funds.15 BankAmerica also has indicated that the proposed transaction would result in operational efficiencies that would allow it to become a more effective competitor and thereby provide improved services at a lower cost to its customers.

The Board also has carefully considered the competitive effects of this proposal. BankAmerica operates nonbanking subsidiaries that compete with certain nonbanking subsidiaries of Robertson. In each case, the markets for the nonbanking services are unconcentrated, and there are numerous providers of the services. As a result, consummation of this proposal would have a de minimis effect on competition for the services, and the Board has concluded that the proposal would not result in a significantly adverse effect on competition in any relevant market. Under the framework established in this and prior decisions, including the prudential limitations established by the Board in the Section 20 Orders, the Board has determined that consummation of the proposal is not likely to result in any significantly adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices that would outweigh the public benefits of the proposal.

Accordingly, based on all the facts of record, the Board has determined that the balance of public benefits that it must consider under the proper incident to banking standard of section 4(c)(8) of the BHC Act is favorable and consistent with approval of the proposal.

On the basis of all the facts of record, including all the commitments and representations made by BankAmerica, the Board has determined to, and hereby does, approve this notice subject to all the terms and conditions discussed in this order and in the Section 20 Orders, as modified by the Modification Orders. The Board's approval of this proposal extends only to activities conducted within the limitations of those orders and this order, including the Board's reservation of authority to establish additional limitations to ensure that activities of BankAmerica and BASI are consistent with safety and soundness, avoiding conflicts of interests, and other relevant considerations under the BHC Act. Underwriting and dealing in any manner other than as approved in this order and the Section 20 Orders, as modified by the Modification Orders, is not authorized for BASI.

The Board's determination also is subject to all the terms and conditions set forth in Regulation Y, including those in sections 225.7 and 225.25(c) (12 C.F.R. 225.7 and 225.25(c)), 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 BankAmerica's compliance with all the commitments made in connection with this notice, including the commitments discussed in this order and the conditions set forth in the Board regulations and orders noted above. The commitments and conditions shall be deemed to be conditions imposed in writing by the Board in connection with its findings and decisions, 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 by the Federal Reserve Bank of San Francisco, acting pursuant to delegated authority.

By order of the Board of Governors,16 effective September 17, 1997.

(signed) Jennifer J. Johnson

Jennifer J. Johnson

Deputy Secretary of the Board


List of Administrative Services
  1. Maintaining and preserving the records of the Funds, including financial and corporate records.

  2. Computing net asset value, dividends, performance data and financial information regarding the Funds.

  3. Furnishing statistical and research data.

  4. Preparing and filing with the SEC and state securities regulators registration statements, notices, reports, and other materials required to be filed under applicable laws.

  5. Preparing reports and other informational materials regarding the Funds, including proxies and other shareholder communications.

  6. Providing legal and other regulatory advice to the Funds in connection with their other administrative functions.

  7. Providing office facilities and clerical support for the Funds.

  8. Developing and implementing procedures for monitoring compliance with regulatory requirements and compliance with the Funds' investment objectives, policies and restrictions as established by the board of directors/trustees of the Funds.

  9. Providing routine fund accounting services and liaison with outside auditors.

  10. Preparing and filing tax returns, and monitoring tax compliance.

  11. Reviewing and arranging for payment of expenses of the Funds.

  12. Providing communication and coordination services with regard to the Funds' investment advisor, transfer agent, custodian, distributor and other service organizations that render recordkeeping or shareholder communication services.

  13. Reviewing and providing advice to the distributor, the fund and the investment advisor regarding sales literature and marketing plans for the Funds.

  14. Providing information to the distributor's personnel concerning performance and administration of the Funds.

  15. Providing marketing support with respect to sales of the Funds through financial intermediaries, including participating in seminars, meetings and conferences designed to present information concerning the operations of the Funds.

  16. Providing reports to the directors of the Funds with regard to the activities of the Funds.

  17. Providing telephone shareholder services through a toll-free 800 number.


1 Robertson Group owns 99 percent of Robertson, Stephens & Company, L.L.C ("Robertson Sub"). Robertson Stephens Co. owns the remaining 1 percent membership interest in Robertson Sub and is the managing member.

BankAmerica proposes to merge Robertson into Ladder Merger Corporation, a newly formed Delaware corporation, wholly owned by BankAmerica ("BAC Sub"). Simultaneously, BankAmerica would merge the principal subsidiary of Robertson Sub with and into BankAmerica Securities, Inc., San Francisco, California, ("BASI"), a subsidiary of BankAmerica.

2 A list of the administrative services that BankAmerica would provide is included in the Appendix.

3 Asset and ranking data are as of June 30, 1997.

4 Robertson currently controls several private investment funds. BankAmerica has committed to conform, within two years of acquiring Robertson, all activities and investments of Robertson and its subsidiaries, including its involvement with various investment funds, to those permissible for bank holding companies under section 4 of the BHC Act and Regulation Y. BankAmerica also has committed that, upon the acquisition of Robertson by BankAmerica, Robertson Sub will cease acting as a distributor of mutual funds.

After the merger, BAC Sub would acquire from Robertson Sub two subsidiaries engaged in offshore broker-dealer activities. The activities of these two subsidiaries are within BankAmerica's existing authority and are permissible under Regulation K. The subsidiaries may be acquired under the general consent authority in Regulation K. See 12 C.F.R. 211.5(c)(1), (d).

5 See BankAmerica, 80 Federal Reserve Bulletin 1104 (1994) ("BankAmerica Order").

6 See BankAmerica, 79 Federal Reserve Bulletin 1163 (1993); and BankAmerica Order.

7 BankAmerica would engage in the proposed mutual fund advisory and administrative activities in a manner consistent with previous orders. See Commerzbank AG, 83 Federal Reserve Bulletin 678 (1997) ("Commerzbank"); and Bankers Trust New York Corporation, 83 Federal Reserve Bulletin 780 (1997) ("Bankers Trust"). An independent distributor would distribute shares of the mutual funds that BankAmerica advises and administers. See Bankers Trust, p. 782 n. 13.

8 See BankAmerica Order.

9 See J.P. Morgan & Co. Incorporated, et al., 75 Federal Reserve Bulletin 192 (1989), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System , 900 F.2d 360 (D.C. Cir. 1990); Citicorp, et al., 73 Federal Reserve Bulletin 473 (1987), aff'd sub nom. Securities Industry Ass'n v. Board of Governors of the Federal Reserve System, 839 F.2d 47 (2d Cir. 1988), cert. denied, 486 U.S. 1059 (1988); as modified by Review of Restrictions on Director, Officer and Employee Interlocks, Cross-Marketing Activities, and the Purchase and Sale of Financial Assets Between a Section 20 Subsidiary and an Affiliated Bank or Thrift, 61 Federal Register 57,679 (1996) (collectively, "Section 20 Orders"). See also Revenue Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies Engaged in Underwriting and Dealing in Securities, 61 Federal Register 68,750 (1996). Compliance with the 25-percent revenue limitation shall be calculated in accordance with the method stated in the Section 20 Orders, as modified by the Order Approving Modifications to the Section 20 Orders, 75 Federal Reserve Bulletin 751 (1989); and 10 Percent Revenue Limit on Bank-Ineligible Activities of Subsidiaries of Bank Holding Companies Engaged in Underwriting and Dealing Securities, 61 Federal Register 57,679 (1996) (collectively, "Modification Orders").

10 See Section 20 Orders and Modification Orders. BASI may provide services that are necessary incidents to the proposed underwriting and dealing activities. Unless BASI receives specific approval under section 4(c)(8) of the BHC Act to conduct the activities independently, any revenues from the incidental activities must be treated as ineligible revenues subject to the Board's revenue limitation.

11 12 U.S.C. § 1843(c)(8).

12 See 12 C.F.R. 225.26.

13 The Board notes that, as a registered broker-dealer, BASI must comply with the SEC's net capital rule. See 15 C.F.R. 240.15c3-1.

14 See Amendments to Restrictions in the Board's Section 20 Orders, 62 Federal Register 45,295 (1997).

15 See 12 C.F.R. 225.125. The interpretive rule requires a bank holding company that recommends to customers shares of a mutual fund that the bank holding company advises to caution customers to read the fund prospectus before investing and to advise customers in writing that the fund's shares are not insured by the Federal Deposit Insurance Corporation, and are not deposits, obligations of, or endorsed or guaranteed in any way, by any bank, unless that happens to be the case. The holding company also must disclose in writing to the customer the role of the company or its affiliate as investment advisor to the fund.

16 Voting for this action: Chairman Greenspan, Vice Chair Rivlin, and Governors Kelley, and Phillips. Absent and not voting: Governor Meyer.

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