CDMA, Qualcomm, [Hong Kong, Korea, LA] THE MARKET TEST! Message Board

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Technology Stocks : CDMA, Qualcomm, [Hong Kong, Korea, LA] THE MARKET TEST!

QCOM 169.27

-4.8%

Jan 12 3:59 PM EST

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To: Ramsey Su who wrote (609)	8/30/1996 11:51:00 AM
From: Philip Merryman	of 1819

Mr. Su, Thank you for your observations. BT Securities is the U.S. broker/dealer subsidiary of Bankers Trust New York Corporation which is, according to them, the nation's ninth largest banking company with assets of more than $100 billion and equity capital of $5 billion. Generally, commercial banks are prohibited by the Banking Act of 1933 (also known as the Glass-Steagal Act) from underwriting and being a broker/dealer in securities. There are 2 exceptions to this rule. The first is they are allowed to deal in securities offered and backed by the federal government and its sponsored agencies, and certain state and local government securities. These types of securities are referred to as "bank-eligible" securities. The second exception is found in Section 20 of the Banking Act of 1933 where it states a bank can have a subsidiary which deals in "bank-ineligible" securities (defined as municipal revenue bonds, private mortgage-backed securities, commercial paper, asset-backed securities, and stocks and bonds) so long as it is not "principally engaged" in these securities. The Federal Reserve has interpreted this to mean as long as the subsidiaries revenue from "bank-ineligible" activities is 10% or less of its total revenue. Bank subsidiaries that meet this requirment are known as Section 20 subsidiaries since it is Section 20 of the Banking Act of 1933 which permits their creation. BT Securities is such a Section 20 subsidiary. Many banks now have Section 20 subsidiaries, including Citibank, J.P. Morgan and Chase, who seek to compete with pure broker/dealers such as Goldman Sachs, Lehman Brothers and Bear Stearns. Philip Merryman

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