OFFICIAL SEAL OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 

OFFICIAL LETTERHEAD STATIONARY FOR SCOTT G. ALVAREZ, GENERAL COUNSEL 

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 

WASHINGTON, D.C. 20551 

September 29, 2006 

Robert L. Tortoriello, Esq. 

Cleary Gottlieb Steen & Hamilton LLP 

One Liberty Plaza 

New York, New York 10006 

Dear Mr. Tortoriello: 

This is in response to your letter, on behalf of Barclays PLC and 

its subsidiaries ("Barclays"), requesting clarification of the application of 

sections 22(g) and 22(h) of the Federal Reserve Act ("FRA") (12 U.S.C. 

sections 375a, 375b) and th3 Board's Regulation O (12 CFR part 215) to 

companies that control shares issued by a U.S. bank or holding company of 

a U.S. bank ("banking organization") as part of their investment advisory 

functions. Specifically, you have asked whether a person that owns, controls, 

or has the power to vote shares issued by a banking organization in connection 

with the person's investment advisory functions "owns, controls, or has the 

power to vote" such shares for purposes of the definitions of control and principal 

shareholder in sections 215.2(c), 215.2(m), and 215.11(a)(1) of Regulation O 

(12 CFR 215.2(c), 215.2(m), and 215.11(a)(1)). 

Section 215.2(c) of Regulation O provides that a person controls a 

company if the person "directly or indirectly, or acting through or in concert with 

one or more other persons, owns, controls, or has the power to vote 25 percent or 

more of any class of voting securities of the company." Section 215.2(m) of 

Regulation O defines a principal shareholder of a bank as a person that "directly or 

indirectly, or acting through or in concert with one or more persons, owns, 

controls, or has the power to vote more than 10 percent of any class of voting 

securities of [the] bank." Section 215.11(a)(1) of Regulation O (which addresses 

public disclosure requirements for bank lending to insiders) defines a principal 

shareholder of a member bank as a person that "directly or indirectly, owns, 

controls, or has power to vote more than 10 percent of any class of voting 

securities of the member bank." 
Page 2 

You have indicated that Barclays, as part of its global investment 

management functions, provides investment advisory services to a wide variety of 

mutual funds, other investment funds and collective investment vehicles, and 

separate accounts. In this context, Barclays often would have dispositive authority 

over portfolio shares issued by banking organizations and generally would have the 

power to vote these shares on behalf of its client funds and accounts. 

You have argued that a person should not be deemed to own, control, 

or have the power to vote shares issued by a banking organization for purposes of 

Regulation O if the person is acting as an investment advisor. Sections 22(g) and 

22(h) of the FRA and Regulation O, however, do not contain an exemption for 

shares owned, controlled, or voted as part of investment advisory functions, or any 

other exemption that applies to your factual situation. In addition, unlike sections 

23A and 23B of the FRA, sections 22(g) and 22(h) of the FRA do not give the 

Board authority to exempt transactions and relationships from their requirements. 

[Footnote 1. Begin text of Footnote 1. 12 U.S.C. section 371c(f)(2). End 

Footnote 1.] Consequently, the Board does not have statutory authority to exempt 

ownership of, control of, or power to vote shares held in connection with investmen

advisory functions from the requirements of Regulation O. 

In light of the terms and underlying purposes of sections 22(g) and 

22(h) of the FRA and Regulation O, it is my opinion that Barclays (i) would be a 

principal shareholder of a banking organization for purposes of Regulation O if 

Barclays has dispositive or voting power over more than 10 percent of any class of 

voting securities of the banking organization; and (ii) would control a banking 

organization for purposes of Regulation O if Barclays has dispositive or voting 

power over 25 percent or more of any class of voting securities of the banking 

organization. 

This opinion applies only to the specific issues and circumstances 

described above and does not address any other issues or circumstances. Please do 

not hesitate to call Mark Van Der Weide (202-452-2263) or Amanda Allexon 

(202-452-3818 of my staff if you have any additional questions concerning this 

matter. 

Sincerely, 

(signed) Scott G. Alvarez