# OCC Interpretive Letter No. 940: Letter confirms that a national bank may acquire for limited periods of time, limited interests in private investment funds for which it serves as investment manager

> Federal · Agency guidance · In force

URL: https://www.frixlaw.com/law-library/statutes/OCC_INT0940

## Section

- **Citation:** OCC Interpretive Letter No. 940
- **Heading:** Letter confirms that a national bank may acquire for limited periods of time, limited interests in private investment funds for which it serves as investment manager
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** OCC Interpretive Letters / Letter confirms that a national bank may acquire for limited periods of time, limited interests in private investment funds for which it serves as investment manager.

## Text

O
Comptroller of the Currency
Administrator of National Banks
Washington, DC 20219
Interpretive Letter #940
May 24, 2002 July 2002
12 USC 24(7)
Re:
[ ] Investment Management Activities
Dear [ ]:
This is in response to your letter requesting confirmation that [ ] (the “Bank”)
may hold for limited periods of time, limited interests in certain private investment funds for
which it serves as investment manager. The Bank contends that holding such limited interests is
convenient and useful for the Bank in order to conduct its investment management business. For
the reasons set forth below, we conclude that the Bank may hold the interests in the funds in the
manner and as described herein.
A.
Background
The Bank, which is a subsidiary of [ A ], is a national bank with powers limited to trust
powers. As a national bank, the Bank is exempt from registration as an investment advisor under
the Investment Advisers Act of 1940.1 The Bank serves as investment manager for a number of
private investment funds organized in the United States (the “Funds”).2 The Funds invest in a

1 15 U.S.C. § 80b-1 to 80b-21.
2 In addition to the Funds, the Bank also serves as investment manager for a number of private investment funds
organized outside the United States. This letter does not address the permissibility of the Bank’s activities with
respect to the foreign funds.
in the United States (the “Funds”).2 The Funds invest in a

1 15 U.S.C. § 80b-1 to 80b-21.
2 In addition to the Funds, the Bank also serves as investment manager for a number of private investment funds
organized outside the United States. This letter does not address the permissibility of the Bank’s activities with
respect to the foreign funds.

2
variety of financial instruments, including stocks and bonds, currencies, and commodities. The
Funds use cash instruments as well as over-the-counter and exchange-traded derivatives. The
Funds also take both short and long positions in securities. The Funds may invest in securities
and other financial assets in which a national bank ordinarily is not permitted directly to invest.3
The Funds are structured as multi-advisor funds. As investment manager, the Bank chooses the
advisors for each Fund, allocates Fund assets to each advisor, and sets up stop-loss provisions
and other limits for the advisors. The Bank also monitors the advisors’ performance and
processes, re-allocates assets among advisors, and, if necessary, terminates advisors that no
longer meet performance or other standards. Certain of the Funds are organized as Delaware
limited partnerships and others are organized as Delaware limited liability companies. All of the
Funds are taxed as partnerships. Consistent with this tax treatment, all the losses, gains, fees,
and expenses are passed through from the Funds to their respective investors.
The Funds’ investors are primarily high net worth individuals who meet the definitions of both
accredited investors under the Securities Act of 19334 and qualified purchasers under the
Investment Company Act of 1940.5 The Funds are marketed primarily by broker-dealers that are
affiliates of the Bank
losses, gains, fees,
and expenses are passed through from the Funds to their respective investors.
The Funds’ investors are primarily high net worth individuals who meet the definitions of both
accredited investors under the Securities Act of 19334 and qualified purchasers under the
Investment Company Act of 1940.5 The Funds are marketed primarily by broker-dealers that are
affiliates of the Bank. These affiliated broker-dealers are registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934.6 As investment manager, the
Bank receives both a management fee and a fee for performance for each of the Funds. The
management fee is a percentage of the assets of each Fund. The fee for performance is a
percentage of the profits of each Fund above a certain hurdle rate.
The Bank represents that it would be to the advantage of U.S. investors in the Funds if the
Bank’s compensation for performance were paid as a share of profits, rather than as a fee. To
receive a share of the profits, the Bank would need to hold an interest in the Funds. In the case
of Funds organized as limited partnerships, the Bank would become a special limited partner. As
a special limited partner, the Bank would not participate in all of the gains and losses of the
partnership, but only in the gains equal to the performance fee to which the Bank is entitled as
investment manager. In the case of Funds organized as limited liability companies, the Bank
would be a special member of those companies, with the same types of rights it would have in
the limited partnerships. We refer to the Bank’s special limited partner and special member
interests in the Funds as “Special Interests.”

3 The Bank plans to invest only in funds that invest primarily in securities. Any non-securities investments will be
limited to financial investments, and will not include real estate or tangible personal property.
4 15 U.S.C. § 77a to 77aa.
5 15 U.S.C. § 80a-1 to 80a-64
d partner and special member
interests in the Funds as “Special Interests.”

3 The Bank plans to invest only in funds that invest primarily in securities. Any non-securities investments will be
limited to financial investments, and will not include real estate or tangible personal property.
4 15 U.S.C. § 77a to 77aa.
5 15 U.S.C. § 80a-1 to 80a-64.
6 15 U.S.C. § 77b et seq.

3
Performance compensation can be a substantial percentage of the Funds’ respective returns. The
Bank represents that individual investors, trusts, and investors taxed as partnerships that in turn
have individual or trust investors, prefer that investment funds structure performance
compensation as an allocation to the investment manager’s equity account rather than as a fee.
Under U.S. tax law, individual investors must report as income their proportionate share of the
gross amount of an investment fund’s income and gains before deducting investment-related fees
and expenses paid by the investment fund. The limit placed by the U.S tax laws on the
deductibility of these fees and expenses may preclude high-income individuals from deducting
their full proportionate share of the fees and expenses of the investment funds. If, however, the
investment manager is paid in the form of a profit allocation, rather than through a performance
fee, the amount so paid is not treated as income to investors who are not recipients of the
allocation.
For these reasons, the Bank represents that it is an industry practice for investment advisors and
managers of certain types of investment funds to receive performance-related compensation as a
profit allocation. The Bank has provided examples of other, similar private investment funds
that its affiliated broker-dealer markets to investors. The similar funds marketed by the broker-
dealer are structured to provide payments for advisory services as fund allocations rather than as
fees to maximize tax efficiency for investors
estment funds to receive performance-related compensation as a
profit allocation. The Bank has provided examples of other, similar private investment funds
that its affiliated broker-dealer markets to investors. The similar funds marketed by the broker-
dealer are structured to provide payments for advisory services as fund allocations rather than as
fees to maximize tax efficiency for investors. Because several nonbank investment managers
follow industry practice in structuring performance compensation as an equity interest, the Bank
believes that the limitation on deductibility on the Funds’ performance fees as currently
structured (rather than the proposed performance-based equity allocation to the Bank as
investment manager) is having a significant adverse effect on the Bank’s ability to compete for
this type of advisory business. The Bank represents that if it is not able to structure its
performance-based compensation using an allocation of income and gains to its equity account,
the Funds would be significantly disadvantaged in competing for investors’ money.
The Bank’s ownership interest in the Funds would be limited. The Bank does not propose to
make any out-of-pocket investments in the Funds, although it will hold a Special Interest in each
Fund to enable it to receive its performance-based compensation in the form of a profit allocation
as described above. The Bank has represented that under the terms of the instruments governing
the Funds and creating the Special Interests, the Bank will not participate in any losses suffered
by the Funds. The Bank will account for its Special Interest in the Funds under the equity
method of accounting. The Bank’s loss exposure from an accounting perspective will be limited
to the amount of profit allocation it expects to receive as compensation. The Special Interest
would not entitle the Bank to voting rights. The Bank represents that it will receive a Special
Interest in a Fund only while the Bank provides investment management services to the Fund
unds under the equity
method of accounting. The Bank’s loss exposure from an accounting perspective will be limited
to the amount of profit allocation it expects to receive as compensation. The Special Interest
would not entitle the Bank to voting rights. The Bank represents that it will receive a Special
Interest in a Fund only while the Bank provides investment management services to the Fund.
The Bank will withdraw all profit allocations immediately.7
The Bank proposes to receive a Special Interest in a Fund for which it serves as investment

7 The Bank has indicated that it will have a standing request for redemption of all equity allocations from each Fund.
The Bank will receive the redemption proceeds on the same business day that a Fund determines the final amount of
each allocation. Because the Bank will in effect withdraw all profit allocations immediately, the amount of the
Bank’s interest in any Fund as a practical matter would, consistent with Interpretive Letter No. 897, supra, never
exceed 24.99 percent of the total equity of any fund.

4
manager only to the extent it is necessary to attract investors into the Fund. The Bank will hold
Special Interests only in investment funds that hold securities and financial instruments, and will
not invest in any fund that includes real estate or tangible personal property. The Bank will hold
a Special Interest in a Fund containing bank-ineligible investments only while the Bank serves as
an investment manager to the Fund, and only if the terms of the instruments governing the Fund
allow the bank to sell, redeem or otherwise dispose of its equity allocation if it no longer services
the Fund.
B.
Analysis
1. The Bank’s holding an interest in funds in order to engage in the investment advisory
business is incidental to the business of banking.

The OCC has long held that a national bank may provide investment management services as
part of the business of banking authorized under 12 U.S.C
l, redeem or otherwise dispose of its equity allocation if it no longer services
the Fund.
B.
Analysis
1. The Bank’s holding an interest in funds in order to engage in the investment advisory
business is incidental to the business of banking.

The OCC has long held that a national bank may provide investment management services as
part of the business of banking authorized under 12 U.S.C. § 24(Seventh) and pursuant to their
fiduciary powers under 12 U.S.C. § 92a.8 Section 24(Seventh) also gives national banks
incidental powers to engage in activities that are incidental to enumerated bank powers as well as
the broader “business of banking.”9 Prior to VALIC, the standard that was often considered in
determining whether an activity was incidental to banking was the one advanced by the First
Circuit Court of Appeals in Arnold Tours.10 The Arnold Tours standard defined an incidental
power as one that is “convenient or useful” in connection with the performance of one of the
bank’s established activities pursuant to its express powers under the National Bank Act.”11
Even prior to VALIC, the Arnold Tours formula represented the narrow interpretation of the
“incidental powers” provision of the National Bank Act. The VALIC decision, however, has
established that the Arnold Tours formula should be read to provide that an incidental power
includes one that is “convenient” or “useful” to the “business of banking,” as well as a power
incidental to the express powers specifically enumerated in 12 U.S.C. § 24(Seventh). Thus, it
would be considered incidental to a permissible bank activity for a national bank to hold interests
in an investment fund to which it provides investment management services if, under the
circumstances presented, holding the interests is convenient or useful to the clearly bank-
permissible investment management activities conducted by the Bank.12

8 See, e.g., Interpretive Letter No
permissible bank activity for a national bank to hold interests
in an investment fund to which it provides investment management services if, under the
circumstances presented, holding the interests is convenient or useful to the clearly bank-
permissible investment management activities conducted by the Bank.12

8 See, e.g., Interpretive Letter No. 897 (October 23, 2000) reprinted in [2000-2001 Transfer Binder] Fed. Banking
Law. Rep. (CCH) ¶ 81-416; Interpretive Letter No. 851 (December 8, 1999) reprinted in [1998-1999 Transfer
Binder] Fed. Banking L. Rep. (CCH) ¶ 81,308; Interpretive Letter No. 871 (October 14, 1999) reprinted in [1999-
2000 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 81,365; Conditional Approval Letter No. 164 (December 9,
1994); Interpretive Letter No. 648 (May 4, 1994) reprinted in [1994 Transfer Binder] Fed. Banking L. Rep. (CCH) &
83,557; Interpretive Letter No. 647 (April 15, 1994), reprinted in [1994 Transfer Binder] Fed. Banking L. Rep.
(CCH) & 83,558; Interpretive Letter No. 622 (April 9, 1993) reprinted in [1993-1994 Transfer Binder] Fed.
Banking L. Rep. (CCH) & 83,557; Interpretive Letter No. 403 (December 9, 1987), reprinted in [1988-1989
Transfer Binder] Fed. Banking L. Rep. (CCH) & 85,627.
9 VALIC, supra, at 258 n. 2.
10 Arnold Tours v. Camp, 472 F.2d 427 (1st Cir. 1972)(“Arnold Tours”).
11 Id. at 432.
12 See Interpretive Letter No. 897 (October 23, 2000), reprinted in [2000-2001 Transfer Binder] Fed. Banking Law.
r] Fed.
Banking L. Rep. (CCH) & 83,557; Interpretive Letter No. 403 (December 9, 1987), reprinted in [1988-1989
Transfer Binder] Fed. Banking L. Rep. (CCH) & 85,627.
9 VALIC, supra, at 258 n. 2.
10 Arnold Tours v. Camp, 472 F.2d 427 (1st Cir. 1972)(“Arnold Tours”).
11 Id. at 432.
12 See Interpretive Letter No. 897 (October 23, 2000), reprinted in [2000-2001 Transfer Binder] Fed. Banking Law.

5
The OCC recently confirmed that it was legally permissible for an investment advisor that was
partly owned by a national bank to hold limited equity interests in certain investment funds to
which the investment advisor provided services.13 In Interpretive Letter No. 897, the OCC noted
several reasons in support of limited equity investments in funds by an investment advisor in
which a national bank proposed to hold a noncontrolling interest, to: (1) assure that the advisor’s
interests were aligned with those of the other investors in the funds; (2) provide a tax-efficient
means for the advisor to receive performance-based compensation; and (3) efficiently fund the
advisor’s obligations to its staff for performance-based bonuses. These three reasons each
constituted reasons why the advisor’s investments in the funds were convenient or useful to the
national bank in carrying out its business, and not mere passive investments unrelated to the
bank’s business.
In the instant proposal, the Bank’s ownership for limited periods of small interests in investment
funds it manages is directly related to, and an integral part of, the Bank=s activity of providing
bank-permissible investment management and administrative services to certain investment
funds. The purpose of holding the Special Interests is to enable the Bank to act as an investment
manager to the types of investment funds in which this form of ownership by the investment
manager is convenient and useful--indeed, necessary. The level of such investments by the Bank
in any single fund and in the aggregate will be limited
nagement and administrative services to certain investment
funds. The purpose of holding the Special Interests is to enable the Bank to act as an investment
manager to the types of investment funds in which this form of ownership by the investment
manager is convenient and useful--indeed, necessary. The level of such investments by the Bank
in any single fund and in the aggregate will be limited. The proposed Special Interests in the
investment funds are not passive or speculative investments on the Bank=s part. The investments
are made solely to enable the Bank to provide investment management services as conducted by
its competitors in the investment management industry. As a practical matter, in order to offer
the funds it manages, the Bank must structure its compensation to hold these investments in this
limited manner. They will be held only when, and for so long as the Bank is providing such
investment management services.
Investing in the funds it manages enables the Bank to receive its compensation in a manner that
provides tax treatment to investors in a Fund comparable to that of investors in similar funds. As
described above, because performance-based compensation frequently can be a substantial
percentage of a private investment fund’s returns, the use of a performance-based allocation can
have a significant effect on individual investors. As a result, private investment funds
traditionally have structured performance compensation as an equity allocation in order to
prevent individuals from being disadvantaged by limits on the deductibility of performance-
based compensation in the form of fees. Permitting the Bank to receive the Special Interests in
the Funds enables it to compete more effectively with entities that can offer this tax result to
their individual investors.

Rep. (CCH) ¶ 81-416. See also Interpretive Letter No
f fees. Permitting the Bank to receive the Special Interests in
the Funds enables it to compete more effectively with entities that can offer this tax result to
their individual investors.

Rep. (CCH) ¶ 81-416. See also Interpretive Letter No. 742 (August 19, 1996), reprinted in [1997-1998 Transfer
Binder] Fed. Banking L. Rep. (CCH) ¶ 81-106; Interpretive Letter No. 737 (August 19, 1996), reprinted in [1997-
1998 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 81-101; Interpretive Letter No. 494 (December 20, 1989),
reprinted in [1989-90 Transfer Binder] Fed. Banking L. Rep. (CCH) ¶ 83,083.
13 Interpretive Letter No. 897 (October 23, 2000), reprinted in [2000-2001 Transfer Binder] Fed. Banking Law.
Rep. (CCH) ¶ 81-416.

6
Accordingly, in the instant case, because the Bank’s ownership of limited equity interests in the
funds it advises is restricted to a context where the holding is integral to facilitating a recognized
bank-permissible activity, such holdings are permissible as an incident to the bank-permissible
investment management activities.
2. Holding an interest in funds in order to engage in the investment advisory business is
not prohibited by 12 U.S.C. 24(Seventh).
Section 24(Seventh) addresses the ability of a national bank to underwrite and deal in securities
tegral to facilitating a recognized
bank-permissible activity, such holdings are permissible as an incident to the bank-permissible
investment management activities.
2. Holding an interest in funds in order to engage in the investment advisory business is
not prohibited by 12 U.S.C. 24(Seventh).
Section 24(Seventh) addresses the ability of a national bank to underwrite and deal in securities.
Specifically, Section 24(Seventh) provides that “[t]he business of dealing in securities and stock
by the association shall be limited to purchasing and selling such securities and stock without
recourse, solely upon the order, and for the account of, customers, and in no case for its own
account, and the association shall not underwrite any issue of securities or stock: Provided, That
the association may purchase for its own account investment securities under such limitations
and restrictions as the Comptroller of the Currency may by regulation prescribe.”
Here, the Bank would not be “dealing” in or “underwriting” securities prohibited for national
banks by Section 24(Seventh). Although Adealing@ and Aunderwriting@ are not defined in
Section 24(Seventh),14 “dealing” in securities is generally understood to encompass the purchase
of securities as principal for resale to others.15 Dealing is buying and selling as part of a regular
business. A dealer typically maintains an inventory of securities and holds itself out to the
public as willing to purchase and sell and continuously quote prices.16 “Underwriting” is
generally understood as encompassing the purchase of securities from an issuer for distribution
and sale to investors.17 Case law confirms that one cannot be an underwriter in the absence of a
public offering.18
Under the above definitions, the Bank receiving the Special Interests would not constitute

14 Although the securities laws definitions are not dispositive in determining whether a particular type of securities
activity is permitted for banks, these
stors.17 Case law confirms that one cannot be an underwriter in the absence of a
public offering.18
Under the above definitions, the Bank receiving the Special Interests would not constitute

14 Although the securities laws definitions are not dispositive in determining whether a particular type of securities
activity is permitted for banks, these definitions provide a useful starting point for characterizing a bank’s securities
activities. Under section 3 of the Securities Exchange Act of 1934, a “dealer” is defined as “any person engaged in
the business of buying and selling securities for his own account, through a broker or otherwise, but does not include
any person insofar as he buys or sells securities for his own account, either individually or in some fiduciary
capacity, but not part of a regular business.” 15 U.S.C. § 78c(a)(5). Under the Securities Act of 1933, an
“underwriter” includes “any person who has purchased from an issuer with a view to, or offers or sells for an issuer
in connection with, the distribution of any security.” 15 U.S.C. § 77(b)(a)(11).
15 Interpretive Letter No. 393 (July 5, 1987), reprinted in [1988-1989 Transfer Binder] Fed. Banking L. Rep. (CCH)
¶ 85,617 (national bank with limited market presence not considered a dealer). See also Louis Loss, Securities
Regulation 2983-84 (3d ed. 1990).
16 Citicorp, J.P. Morgan & Co. Inc., Banker Trust New York Corporation, 73 Fed. Res. Bull. 473 n.4 (1987); OCC
Interpretive Letter No. 684, supra.
17 Interpretive Letter No. 388 (June 16, 1987), reprinted in [1998-1989 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 85,612; Interpretive Letter No. 329 (March 4, 1985), reprinted in [1985-1987 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 85,499.
18 SIA v. Board of Governors, 807 F.2d 1052 (D.C. Cir. 1986), cert. denied, 483 U.S. 1005 (1987).
n.4 (1987); OCC
Interpretive Letter No. 684, supra.
17 Interpretive Letter No. 388 (June 16, 1987), reprinted in [1998-1989 Transfer Binder] Fed. Banking L. Rep.
(CCH) ¶ 85,612; Interpretive Letter No. 329 (March 4, 1985), reprinted in [1985-1987 Transfer Binder] Fed.
Banking L. Rep. (CCH) ¶ 85,499.
18 SIA v. Board of Governors, 807 F.2d 1052 (D.C. Cir. 1986), cert. denied, 483 U.S. 1005 (1987).

7
“dealing” or “underwriting.” The Bank has represented that it will receive the Special Interests
solely for purposes of engaging in the investment management business. The Bank will not hold
the Special Interests in order to engage in a regular business of buying and selling them in the
secondary market19 and will not participate in a public offering of the securities to investors.
The ownership by the Bank of the Special Interests would be a type of equity investment, and
therefore is not the type of security subject to the limitations placed upon national banks’
purchase of investment securities in 12 U.S.C. § 24(Seventh) or in 12 C.F.R. Part 1. The
statutory definition of investment securities includes “marketable obligations evidencing the
indebtedness of any person, copartnership, association or corporation in the form of bonds,
notes, and/or debentures, commonly known as ‘investment securities’” and gives the
Comptroller the authority to define further that term. Accordingly, the OCC issued
implementing regulations defining “investment securities” at 12 C.F.R. Part 1. Under Part 1, an
investment security is defined as “a ‘marketable’ debt obligation that is not predominantly
speculative in nature.”20 Equity securities do not represent debt obligations.
The language in the fifth sentence of Section 24(Seventh) “nothing herein contained shall
authorize the purchase by the association for its own account of any shares of stock of any
corporation” is not a blanket bar on national bank acquisitions of stock
ined as “a ‘marketable’ debt obligation that is not predominantly
speculative in nature.”20 Equity securities do not represent debt obligations.
The language in the fifth sentence of Section 24(Seventh) “nothing herein contained shall
authorize the purchase by the association for its own account of any shares of stock of any
corporation” is not a blanket bar on national bank acquisitions of stock. Rather, as discussed
below, that language was intended to make clear that the express authorization contained in the
statute permitting banks to invest in “investment securities” does not include an authorization for
investments in stock. This proviso does not affect national banks’ authority to hold equities, if
the holding can qualify as permissible because it is part of or incidental to permissible banking
activities.21
In the present situation, the Bank=s receiving the Special Interests enables it to engage in
permissible banking activities and act as investment manager for investment funds that, in
practice, require the manager to take an equity stake. Institutional and sophisticated individual
investors in these funds require the manager to structure the payment of performance fees in this
fashion. In this connection, these investments permit the Bank to offer funds that provide
investors with a tax treatment comparable to that of investors in other, similar funds. The Bank
would be unable to offer these funds on a competitive basis unless it makes these investments.
Based on these circumstances, the proposed investments are an integral component of investment
management services provided by the Bank to the investment funds.
C.
Conclusion
Based upon a review of the information you provided, including the representations and

19 The Bank will not act as market maker in the securities by quoting prices continuously on both sides of the
market.
20 12 C.F.R. § 1.2(e)
s are an integral component of investment
management services provided by the Bank to the investment funds.
C.
Conclusion
Based upon a review of the information you provided, including the representations and

19 The Bank will not act as market maker in the securities by quoting prices continuously on both sides of the
market.
20 12 C.F.R. § 1.2(e).
21 The legislative history of the language in the fifth sentence of Section 24(Seventh) is discussed in detail in
Interpretive Letter 892 (September 13, 2000).

8
commitments made in your letter, and for the reasons discussed above, we conclude that the
Bank may receive the Special Interests in the Funds, subject to the following conditions:
(1) The Funds shall constitute “affiliates” of the Bank and Citibank, N.A. for purposes of
Sections 23A and 23B of the Federal Reserve Act.
(2) Prior to receiving the Special Interest in the Funds, the Bank shall adopt and
implement an appropriate risk management process, acceptable to the OCC
Examiner-in-Charge, to monitor these interests. The Bank’s risk management process
shall be comprehensive and shall include:
(i) Adoption and implementation of a conflict of interest policy addressing all
inherent conflicts associated with the Bank’s holding of the Special Interests in
the Funds; and
(ii) Adoption and implementation of risk management policies and procedures for
monitoring the Special Interests in the Funds and the risks associated with those
interests, taking into account relevant factors noted in OCC guidance (e.g., OCC
Banking Circular 277 (BC-277 - October 1993), Supplemental Guidance 1 to BC-
277 (January 1999) and the Handbook for National Bank Examiners, Risk
Management of Financial Derivatives (January 1997)).
The Bank shall provide the OCC with copies of the policies and procedures described in
the risks associated with those
interests, taking into account relevant factors noted in OCC guidance (e.g., OCC
Banking Circular 277 (BC-277 - October 1993), Supplemental Guidance 1 to BC-
277 (January 1999) and the Handbook for National Bank Examiners, Risk
Management of Financial Derivatives (January 1997)).
The Bank shall provide the OCC with copies of the policies and procedures described in
(i) and (ii) prior to receiving a Special Interest in the funds it manages.
(3) The Bank shall not receive Special Interests in the Funds other than Funds that invest
in securities and financial instruments, and the Bank shall not invest in any Fund that
holds real estate or tangible personal property.
(4) The Bank shall make reports and other information in the Bank’s possession readily
available to OCC supervisory staff as necessary for the OCC to determine compliance
with these conditions.
(5) The Bank will account for its Special Interests in the Funds under the equity method
of accounting.
(6) The Bank will hold Special Interests in a Fund only when, and only for so long as, it
is providing investment management services to the Fund.

9
These conditions are conditions imposed in writing by the OCC in connection with its action on
the Bank’s request for a legal opinion confirming that its interest in the Funds is permissible
under 12 U.S.C. § 24 (Seventh) and, as such, may be enforced in proceedings under applicable
law.
Sincerely,
-signed-
Julie L. Williams
First Senior Deputy Comptroller and Chief Counsel

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- [OCC Interpretive Letter No. 726 Letter concerns the application of the Community Reinvestment Act (CRA) regulations to financial institutions' support of microenterprise lending programs. (06/21/96).](https://www.frixlaw.com/law-library/statutes/OCC_INT0726.md)
- [OCC Interpretive Letter No. 730 Letter concludes that loans proposed by the bank to an unaffiliated distributor of mutual funds would not be subject to interaffiliate lending restrictions contained in 12 U.S.C. 371C. (05/29/96).](https://www.frixlaw.com/law-library/statutes/OCC_INT0730.md)
- [OCC Interpretive Letter No. 732 National bank may make a 5.5% investment in software company which is engaged in the design, development, marketing and maintenance of a network for electronic funds transfers and electronic data interchange, including transacting electronic commerce and marketing software products for use on its world-wide electronic commerce network. (05/10/96).](https://www.frixlaw.com/law-library/statutes/OCC_INT0732.md)
- [OCC Interpretive Letter No. 733 National bank receiver is subject to the rights of secured creditors and creditors entitled to setoff. U.S. legal principles regarding enforcement of security interests are applicable to a receivership of a federal branch or agency conducted under National Bank Act. Therefore, receiver of an uninsured federal branch or agency does not have the right to interfere with the rights of secured creditors, including application of collateral held in U.S. to obligations of a non-U.S. office of the bank. (06/19/96).](https://www.frixlaw.com/law-library/statutes/OCC_INT0733.md)
- [OCC Interpretive Letter No. 736 Lending limit exception for participations not limited to banks. Non-banks may act as participants. (07/25/96)](https://www.frixlaw.com/law-library/statutes/OCC_INT0736.md)
- [OCC Interpretive Letter No. 737 Huntington National Bank's acquisition of minority interest in a limited liability company providing stored value systems. (08/19/96)](https://www.frixlaw.com/law-library/statutes/OCC_INT0737.md)
- [OCC Interpretive Letter No. 738 National bank's participation in a guaranty issued by an agent for a syndication of lenders with respect to their borrower's letter of credit reimbursement obligations to another bank or financial institution is permissible under I.R. 7.1016. (08/14/96)](https://www.frixlaw.com/law-library/statutes/OCC_INT0738.md)
- [OCC Interpretive Letter No. 740 Letter advises the Bank as follows: 1) The question of whether "salary" as used in 12 C.F.R. 2.4 includes an officer's base salary, bonuses, director's fees and/or any other compensation paid by the Bank must be determined by the Bank's management; 2) the question of whether the payment bonuses for credit life sales under 12 C.F.R. 2.4 is based on salary received by the recipient in a calendar year, a fiscal year, or any 12-month period must be determined by the Bank's management; and 3) pursuant to 12 C.F.R. 2.4, if the Bank's CEO is a loan officer and the CEO participates in the bonus plan under which payments based on credit life insurance sales are made, the CEO must be included in averaging the salaries of loan officers that participate in the Bank's bonus or incentive plan. (08/19/96)](https://www.frixlaw.com/law-library/statutes/OCC_INT0740.md)
- [OCC Interpretive Letter No. 741 National bank may acquire majority interest in company which operates call center facility which operates programs by which potential customers for new or used automobiles may access databases containing information on the used and new car inventories of numerous automobile dealerships in its metropolitan area. (08/19/96)](https://www.frixlaw.com/law-library/statutes/OCC_INT0741.md)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/OCC_INT0940. Check the current official text before relying on it. Not legal advice.