[Code of Federal Regulations]
[Title 12, Volume 3]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR223.53]

[Page 76-77]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 223--TRANSACTIONS BETWEEN MEMBER BANKS AND THEIR AFFILIATES (REGULATION W)--Table of Contents
 
              Subpart F--General Provisions of Section 23B
 
Sec. 223.53  What asset purchases are prohibited by section 23B?

    (a) Fiduciary purchases of assets from an affiliate. A member bank 
may not purchase as fiduciary any security or other asset from any 
affiliate unless the purchase is permitted:
    (1) Under the instrument creating the fiduciary relationship;
    (2) By court order; or
    (3) By law of the jurisdiction governing the fiduciary relationship.
    (b) Purchase of a security underwritten by an affiliate. (1) A 
member bank, whether acting as principal or fiduciary, may not knowingly 
purchase or

[[Page 77]]

otherwise acquire, during the existence of any underwriting or selling 
syndicate, any security if a principal underwriter of that security is 
an affiliate of the member bank.
    (2) Paragraph (b)(1) of this section does not apply if the purchase 
or acquisition of the security has been approved, before the security is 
initially offered for sale to the public, by a majority of the directors 
of the member bank based on a determination that the purchase is a sound 
investment for the member bank, or for the person on whose behalf the 
member bank is acting as fiduciary, as the case may be, irrespective of 
the fact that an affiliate of the member bank is a principal underwriter 
of the security.
    (3) The approval requirement of paragraph (b)(2) of this section may 
be met if:
    (i) A majority of the directors of the member bank approves 
standards for the member bank's acquisitions of securities described in 
paragraph (b)(1) of this section, based on the determination set forth 
in paragraph (b)(2) of this section;
    (ii) Each acquisition described in paragraph (b)(1) of this section 
meets the standards; and
    (iii) A majority of the directors of the member bank periodically 
reviews acquisitions described in paragraph (b)(1) of this section to 
ensure that they meet the standards and periodically reviews the 
standards to ensure that they continue to meet the criterion set forth 
in paragraph (b)(2) of this section.
    (4) A U.S. branch, agency, or commercial lending company of a 
foreign bank may comply with paragraphs (b)(2) and (b)(3) of this 
section by obtaining the approvals and reviews required by paragraphs 
(b)(2) and (b)(3) from either:
    (i) A majority of the directors of the foreign bank; or
    (ii) A majority of the senior executive officers of the foreign 
bank.
    (c) Special definitions. For purposes of this section:
    (1) ``Principal underwriter'' means any underwriter who, in 
connection with a primary distribution of securities:
    (i) Is in privity of contract with the issuer or an affiliated 
person of the issuer;
    (ii) Acting alone or in concert with one or more other persons, 
initiates or directs the formation of an underwriting syndicate; or
    (iii) Is allowed a rate of gross commission, spread, or other profit 
greater than the rate allowed another underwriter participating in the 
distribution.
    (2) ``Security'' has the same meaning as in section 3(a)(10) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(10)).