This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

307

Vol. 66, No. 2

Wednesday, January 3, 2001

1The exceptions are engaging as principal in

certain insurance underwriting activities, real estate

investment and development (unless otherwise

expressly authorized by law), and merchant

banking activities permitted in 12 U.S.C.

1843(k)(4)(H) or (I). 12 U.S.C. 24a(a)(2)(B).

2The New York Clearing House Association

submitted its request on behalf of The Bank of New

York Company, Inc.; Chase Manhattan Corporation;

Citigroup, Inc.; J.P. Morgan, Inc.; Bankers Trust

Company; Fleet Boston, Inc.; HSBC; Bank One

Corporation; First Union Corporation; and Wells

Fargo & Company.

FEDERAL RESERVE SYSTEM

12 CFR Part 225

[Regulation Y; Docket No. R–1091]

Bank Holding Companies and Change

in Bank Control

DEPARTMENT OF THE TREASURY

Office of the Under Secretary for

Domestic Finance

12 CFR Part 1501

RIN 1505–AA84

Financial Subsidiaries

AGENCIES: Board of Governors of the

Federal Reserve System and Department

of the Treasury.

ACTION: Joint proposed rule with request

for public comments.

SUMMARY: The Board of Governors of the

Federal Reserve System and the

Secretary of the Treasury jointly

propose to seek comment on whether to

determine by rule that real estate

brokerage is an activity that is financial

in nature or incidental to a financial

activity and therefore permissible for

financial holding companies and

financial subsidiaries of national banks.

The Board and the Secretary also jointly

propose to solicit comment on whether

real estate management activities could

be considered financial in nature or

incidental to a financial activity. The

Board’s proposed rule would amend

subpart I of the Board’s Regulation Y to

add real estate brokerage and real estate

management to the list of activities

permissible for financial holding

companies. The Secretary’s proposed

rule would amend its financial

subsidiary regulations to add real estate

brokerage and real estate management to

the activities permissible for financial

subsidiaries of national banks. The

Board and the Secretary solicit comment

on all aspects of the proposal.

DATES: Comments must be received by

March 2, 2001.

ADDRESSES: Comments should refer to

docket number R–1091 and should be

mailed to Ms. Jennifer J. Johnson,

Secretary, Board of Governors of the

Federal Reserve System, 20th Street and

Constitution Avenue, NW., Washington,

DC 20551 (or mailed electronically to

regs.comments@federalreserve.gov) and

to Real Estate Brokerage and

Management Regulation, Office of

Financial Institution Policy, U.S.

Department of the Treasury, 1500

Pennsylvania Avenue, NW., Room SC

37, Washington, DC 20220 (or mailed

electronically to

financial.institutions@do.treas.gov).

Comments addressed to Ms. Johnson

also may be delivered to the Board’s

mailroom between 8:45 a.m. and 5:15

p.m. and, outside those hours, to the

Board’s security control room. Both the

mailroom and the security control room

are accessible from the Eccles Building

courtyard entrance, located on 20th

Street between Constitution Avenue and

C Street, N.W. Members of the public

may inspect comments in room MP–500

of the Martin Building between 9 a.m.

and 5 p.m. on weekdays. Comments

addressed to the Treasury Department

may also be delivered to the Treasury

Department mail room between the

hours of 8:45 a.m. and 5:15 p.m. at the

15th Street entrance to the Treasury

Building.

FOR FURTHER INFORMATION CONTACT:

Board of Governors: Scott G. Alvarez,

Associate General Counsel (202/452–

3583), or Mark E. Van Der Weide,

Counsel (202/452–2263), Legal Division;

Board of Governors of the Federal

Reserve System, 20th Street and

Constitution Avenue, NW., Washington,

DC 20551. For users of

Telecommunications Device for the Deaf

(‘‘TDD’’) only, contact Janice Simms at

202/872–4984.

Department of the Treasury: Gerry

Hughes, Senior Financial Analyst (202/

622–2740); Roberta K. McInerney,

Assistant General Counsel (Banking and

Finance) (202/622–0480); or Gary W.

Sutton, Senior Banking Counsel (202/

622–0480).

SUPPLEMENTARY INFORMATION:

Background

The Gramm-Leach-Bliley Act (Pub. L.

106–102, 113 Stat. 1338 (1999)) (‘‘GLB

Act’’) amended the Bank Holding

Company Act (12 U.S.C. 1841 et seq.)

(‘‘BHC Act’’) to allow a bank holding

company or foreign bank that qualifies

as a financial holding company (‘‘FHC’’)

to engage in a broad range of activities

that are defined by the GLB Act to be

financial in nature. The GLB Act also

permits FHCs to engage in other

activities that the Board determines, by

regulation or order and in consultation

with the Secretary of the Treasury

(‘‘Secretary’’), to be financial in nature

or incidental to a financial activity.

The GLB Act also amended the

National Bank Act (12 U.S.C. 1 et seq.)

to allow a national bank to invest in

financial subsidiaries. Financial

subsidiaries may engage, with certain

exceptions, in the same broad range of

activities that are defined by the GLB

Act to be financial in nature and,

therefore, permissible for FHCs.1 In

addition, the GLB Act permits financial

subsidiaries to engage in other activities

that the Secretary determines, in

consultation with the Board, to be

financial in nature or incidental to a

financial activity.

The American Bankers Association

(‘‘ABA’’) and Fremont National Bank &

Trust Company, Fremont, Nebraska,

have asked the Board and the Secretary

(collectively, the ‘‘Agencies’’) to

determine that real estate brokerage and

management activities are financial in

nature. Two additional trade

associations, the Financial Services

Roundtable and the New York Clearing

House Association, have requested that

the Board permit FHCs to engage in real

estate brokerage activities.2 The

National Association of Realtors

(‘‘NAR’’) has urged the Agencies not to

determine that real estate brokerage

activities are financial in nature or

incidental to a financial activity.

The GLB Act directs the Board to

consider a variety of factors when

considering a request for a

determination that an activity is

financial in nature or incidental to a

financial activity, including (i) the

purposes of the BHC Act and the GLB

308 Federal Register / Vol. 66, No. 2 / Wednesday, January 3, 2001 / Proposed Rules

3See 12 U.S.C. 1843(k)(3).

4See 12 U.S.C. 24a(b)(2).

5See H.R. Conf. Rep. No. 106–434, at 153 (1999)

(‘‘permitting banks to affiliate with firms engaged in

financial activities represents a significant

expansion from the current requirement that bank

affiliates may only be engaged in activities that are

closely related to banking’’).

6See National Courier Association v. Board of

Governors of the Federal Reserve System, 516 F.2d

1229, 1237 (D.C. Cir. 1975).

7Under the GLB Act, neither Agency may

determine that an activity is financial in nature or

incidental to a financial activity if the other Agency

indicates in writing that it believes that the activity

is not financial in nature, incidental to a financial

activity, or otherwise permissible. 12 U.S.C.

1843(k)(2)(A)(ii), 24a(b)(1)(B)(i)(II).

8 12 CFR 225.126(c); Boatmen’s Bancshares, Inc.,

58 Federal Reserve Bulletin 427, 428 (1972). In

1987, as part of a proposal to authorize bank

holding companies to engage in real estate

investment (the ‘‘1987 Proposal’’), the Board

proposed permitting a bank holding company to

provide real estate brokerage services in connection

with real estate in which the bank holding company

had an interest. See 52 FR 543 (Nov. 4, 1987); see

also 50 FR 4519 (Jan. 31, 1985). The Board never

adopted this proposed rule in final form.

9See OCC Interpretive Letter No. 84, reprinted in

[1978–1979 Transfer Binder] Fed. Banking L. Rep.

(CCH) ¶ 85,159 (Apr. 3, 1979).

Act; (ii) the changes or reasonably

expected changes in the marketplace in

which FHCs compete; (iii) the changes

or reasonably expected changes in the

technology for delivering financial

services; and (iv) whether the proposed

activity is necessary or appropriate to

allow a FHC to compete effectively with

any company seeking to provide

financial services in the United States,

efficiently deliver financial information

and services through the use of

technological means, or offer customers

any available or emerging technological

means for using financial services or for

the document imaging of data.3 The

Secretary must consider a virtually

identical set of factors in determining

whether an activity is permissible for

financial subsidiaries.4 The Agencies

also may consider other factors and

information that they consider relevant

to their determination.

The Agencies believe that the GLB

Act’s ‘‘financial in nature or incidental’’

standard represents a significant

expansion of the ‘‘closely related to

banking’’ standard that the Board

previously applied in determining the

permissibility of activities for bank

holding companies.5 In considering

whether an activity was closely related

to banking, the Board and the courts

looked to whether banks generally (i)

conduct the proposed activity, (ii)

provide services that are operationally

or functionally so similar to the

proposed services as to equip them

particularly well to provide the

proposed services, or (iii) provide

services that are so integrally related to

the proposed services as to require their

provision in a specialized form.6

Because the new ‘‘financial in nature or

incidental’’ test appears to be

substantially broader than the old

‘‘closely related to banking’’ test, the

Agencies believe that they should

consider an activity to be financial in

nature or incidental to a financial

activity to the extent that it meets the

old standard.

After considering the factors listed

above and other relevant information,

the Agencies propose to seek public

comment on whether to adopt rules that

would define real estate brokerage and

real estate management as activities that

are financial in nature or incidental to

a financial activity. The Board’s

proposed rule would amend § 225.86 of

the Board’s Regulation Y to add these

two new activities to the list of activities

permissible for FHCs. Bank holding

companies and foreign banks that

qualify as FHCs would be permitted to

engage in real estate brokerage and real

estate management by using the postconsummation notice procedure

described in § 225.87 of Regulation Y.

Bank holding companies and foreign

banks that do not qualify as FHCs may

engage only in those nonbanking

activities that were permissible for bank

holding companies prior to the

enactment of the GLB Act and, thus,

could not provide real estate brokerage

or management services under the

proposed rule. The Secretary’s proposed

rule would amend its regulations

regarding financial subsidiaries to add

real estate brokerage and real estate

management to the activities

permissible for financial subsidiaries.

Qualifying national banks would be

permitted to engage in these activities

through financial subsidiaries by

providing the Office of the Comptroller

of the Currency (‘‘OCC’’) with a notice

under the OCC’s rules.

The GLB Act requires that the Board

and the Secretary consult with each

other concerning any request, proposal,

or application for a determination that

an activity is financial in nature or

incidental to a financial activity. The

Agencies have consulted with each

other concerning the proposed rules,

and each Agency supports the other’s

determination to seek public comment

on the proposed rules.7

Proposed Rules

A. Real Estate Brokerage

Real estate brokerage is the business

of bringing together parties interested in

consummating a real estate purchase,

sale, exchange, lease, or rental

transaction and negotiating on behalf of

such parties a contract relating to the

transaction. The activity of real estate

brokerage would include acting as agent

for a party to a real estate transaction;

listing and advertising real estate;

locating buyers, sellers, lessors, and

lessees interested in engaging in real

estate transactions among themselves;

conveying information between the

parties to a potential real estate

transaction; providing advice in

connection with a real estate

transaction; negotiating price and other

terms on behalf of parties to a real estate

transaction; and administering the

closing to a real estate transaction. Real

estate brokerage generally does not

involve purchasing or selling real estate

as principal. The business of real estate

brokerage may only be conducted

pursuant to state licensing laws and

regulations.

As noted, prior to the passage of the

GLB Act, bank holding companies were

permitted to engage only in activities

that the Board determined were closely

related to banking under section 4(c)(8)

of the BHC Act. In 1972, the Board

determined that real estate brokerage

was not closely related to banking for

purposes of the BHC Act.8 Although the

GLB Act does not explicitly authorize

FHCs to act as real estate brokers, the

statute permits FHCs to engage in any

activity that the Board, in consultation

with the Secretary, has determined to be

financial in nature or incidental to a

financial activity. As noted, the GLB

Act’s ‘‘financial in nature or incidental’’

test is broader than the former ‘‘closely

related to banking’’ test.

Similarly, the OCC has not permitted

national banks to engage in general real

estate brokerage.9 Although the GLB Act

does not explicitly authorize financial

subsidiaries to act as real estate brokers,

the statute permits financial subsidiaries

to engage in any activity that the

Secretary, in consultation with the

Board, has determined to be financial in

nature or incidental to a financial

activity. For the reasons discussed

below, the Agencies believe that they

should seek public comment on

whether real estate brokerage activities

are financial in nature or incidental to

a financial activity within the meaning

of section 4(k)(1)(A) of the BHC Act and

section 5136A(a)(2)(A)(i) of the Revised

Statutes.

1. General ‘‘Financial in Nature or

Incidental’’ Analysis

Some depository institutions already

engage in real estate brokerage.

Although, as noted, the OCC has not

permitted national banks to provide

Federal Register / Vol. 66, No. 2 / Wednesday, January 3, 2001 / Proposed Rules 309

10See, e.g., Iowa Code § 524.802 (‘‘A state bank

shall have * * * the power to * * * engage in the

brokerage of insurance and real estate subject to the

prior approval of the superintendent.’’); N.J. Admin.

Code tit. 3, § 11–11.5(a)(4) (permitting a subsidiary

of a New Jersey state-chartered bank to provide real

estate brokerage services); 1979 Ky. AG LEXIS 224

(‘‘A state bank, through its authorized trust

department, and state trust companies may act as

real estate brokers or salesmen in the general real

estate business, regardless of whether it involves

the institution’s fiducial business or not.’’).

11See 12 CFR 559.4(e)(4) and OTS Letter, July 16,

1997 (1997 OTS LEXIS 3).

12With respect to bank holding companies, see,

e.g., 12 CFR 225.22(d)(1) and (3) and 225.28(b)(2),

(3), and (12). With respect to national banks, see,

e.g., 12 U.S.C. 29 (holding bank premises and

acquiring real estate DPC); 12 U.S.C. 92a (general

fiduciary authority); OCC Interpretive Letter No.

467, reprinted in [1988–1989 Transfer Binder] Fed.

Banking L. Rep. (CCH) ¶ 85,691 (Jan. 24, 1989)

(providing real estate appraisal services); OCC

Interpretive Letter No. 387, reprinted in [1988–1989

Transfer Binder] Fed. Banking L. Rep. (CCH) ¶

85,611 (June 22, 1987) (arranging commercial real

estate equity financing); 12 U.S.C. 371 (real estate

lending); 12 CFR 5.34(e)(5)(v) (providing real estate

settlement and escrow services and real estate

investment advisory services).

13See 12 U.S.C. 1843(k)(4)(B), 24a(b)(1)(A)(i). The

authority of a financial subsidiary to underwrite

certain types of insurance is, however, limited. See

12 U.S.C. 24a(a)(2)(B)(i).

14With respect to bank holding companies, see,

e.g., 12 CFR 225.28(b)(7) and 12 U.S.C.

1843(k)(4)(B). With respect to national banks, see,

e.g., 12 U.S.C. 24(7) (securities brokerage services);

OCC Interpretive Letter No. 329, reprinted in [1985–

1987 Transfer Binder] Fed. Banking L. Rep. (CCH)

¶ 85,499 (Mar. 4, 1985) (private placement

services); 12 CFR 5.34(e)(5)(v) (futures commission

merchant services and agency transactional services

relating to swaps and derivatives); and 12 U.S.C. 92

(insurance agency services).

15Real estate brokerage would not fit within the

finder activities permitted to national banks

because real estate brokerage essentially involves

the real estate broker in negotiation of the real estate

transaction—a role specifically forbidden to

national bank finders. See 12 CFR 7.1002(b). Real

estate brokerage would not fit within the finder

activities authorized for FHCs because the Board’s

finder rule prohibits a finder from becoming

involved in negotiation and specifically excludes

any activity that would require the FHC to register

or obtain a license as a real estate agent or broker.

See Board press release (December 13, 2000).

16 12 CFR 7.1002.

17See OCC Interpretive Letter No. 238, reprinted

in [1983–1984 Transfer Binder] Fed. Banking L.

Rep. (CCH) ¶ 85,402 (Feb. 9, 1982). The OCC also

has allowed national banks to participate in the

structuring and negotiation of certain real estate

exchange transactions. See OCC Interpretive Letter

No. 880, reprinted in [1999–2000 Transfer Binder]

Fed. Banking L. Rep. (CCH) ¶ 81,373 (Dec. 6, 1999).

18See Board press release (December 13, 2000).

19See, e.g., 12 CFR 225.28(b)(2)(ii).

20See OCC Interpretive Letter No. 271, reprinted

in [1983–1984 Transfer Binder] Fed. Banking L.

Rep. (CCH) ¶ 85,435 (Sept. 21, 1983).

21 12 U.S.C. 1843(k)(3)(D)(i), 24a(b)(2)(D)(i).

22See National Courier Association v. Board of

Governors of the Federal Reserve System, 516 F.2d

1229, 1237 (D.C. Cir. 1975).

general real estate brokerage services,

several states currently permit their

state-chartered banks to act as a general

real estate broker.10 The Office of Thrift

Supervision (‘‘OTS’’) also has permitted

the service corporation subsidiaries of

federal savings associations to provide

general real estate brokerage services.11

In addition, national and state bank

trust departments have long been

involved as agent in the purchase and

sale of real estate assets that are part of

trust estates.

Although bank holding companies

and financial subsidiaries do not have

authority to provide real estate

brokerage services, banks and bank

holding companies engage in a wide

variety of other real-estate related

activities, including (i) holding bank

premises and acquiring real estate in a

fiduciary capacity or in full or partial

satisfaction of a debt previously

contracted; (ii) making real estate

investments that have as their primary

purpose community development

(subject to certain limits); (iii) providing

real estate appraisal services; (iv)

arranging commercial real estate equity

financing; (v) real estate lending; (vi)

real estate leasing; (vii) providing real

estate settlement and escrow services;

and (viii) providing real estate

investment advisory services.12 Since

the passage of the GLB Act, FHCs and

financial subsidiaries also have been

able to provide title insurance, private

mortgage insurance, and any other type

of insurance to the parties to a real

estate transaction.13 As a result, banks

and bank holding companies participate

in most aspects of the typical real estate

transaction other than brokerage.

In addition, banks and bank holding

companies currently engage in a variety

of activities that are functionally and

operationally similar to real estate

brokerage. Banking organizations have

provided their customers with various

agency transactional services, including

securities brokerage services, private

placement services, futures commission

merchant services, agency transactional

services relating to swaps and other

derivative instruments, and insurance

agency services.14 Although these

agency services are provided by banking

organizations in connection with an

underlying financial transaction (the

purchase of securities, derivatives, or

insurance), the agency services provided

by a real estate broker are similar in

nature to those provided by a securities,

derivatives, or insurance broker.

Although the full range of real estate

brokerage services would not fit within

the scope of national bank or FHC finder

authority,15 many of the essential

aspects of real estate brokerage are

already permissible finder activities.

The OCC’s regulations provide that ‘‘a

national bank may act as a finder in

bringing together a buyer and a seller’’

for a financial or nonfinancial

transaction and further provide that

permissible finder activities include

‘‘identifying potential parties, making

inquiries as to interest, introducing or

arranging meetings of interested parties,

and otherwise bringing parties together

for a transaction that the parties

themselves negotiate and

consummate.’’ 16 Pursuant to the finder

and financial counseling authorities, the

OCC has permitted national banks to

locate, analyze, and make

recommendations regarding the

purchase or sale of real estate; and to

place real estate investment properties

by contacting a limited number of

qualified investors, identifying and

engaging real estate brokers, advising

investors regarding the terms of a real

estate sale, and administering a real

estate closing.17 A final rule issued by

the Board on December 13, 2000,

authorized FHCs to act as a finder.18

In addition, the authority of national

banks and bank holding companies to

assist third parties in obtaining

commercial real estate equity financing

includes an important subset, although

not the full panoply, of services

provided by the typical real estate

broker.19 In this regard, the Board has

allowed bank holding companies to act

as an intermediary for the financing of

commercial or industrial incomeproducing real estate by arranging for

the transfer of the title, control, and risk

of such a real estate project to one or

more investors. Bank holding

companies may only arrange

commercial real estate equity financing

with respect to real estate projects that

are not sponsored by or invested in by

the holding company. The OCC

similarly has authorized national banks

to arrange for the placement of equity

interests in commercial and investment

real estate.20

In determining whether an activity is

financial in nature or incidental to a

financial activity, the GLB Act

specifically instructs the Board and the

Secretary to consider whether the

activity is necessary or appropriate to

allow a FHC or a bank, respectively, to

compete effectively with other financial

services companies operating in the

United States.21 Before the passage of

the GLB Act, in determining whether an

activity was ‘‘closely related to

banking,’’ the law directed the Board to

consider whether banks engaged in the

activity, but did not explicitly authorize

the Board to consider whether other

financial service providers engaged in

the activity.22 This change in law

represents a significant expansion of the

310 Federal Register / Vol. 66, No. 2 / Wednesday, January 3, 2001 / Proposed Rules

23For example, General Motors Acceptance

Corporation operates a thrift, makes mortgage loans,

and provides real estate brokerage services;

Prudential Insurance Company provides insurance

and securities products and real estate brokerage

services; Cendant Corporation provides insurance,

mortgage loans, and real estate brokerage services;

and Long & Foster provides mortgage loans,

insurance products, and real estate brokerage

services.

24 12 U.S.C. 1972(1)(B).

25 12 U.S.C. 371c and 371c–1.

26 12 U.S.C. 371c–1(a)(2)(D). Section 23A also

would cover mortgage loans by a bank to a customer

to the extent that the customer uses part of the loan

proceeds to pay the brokerage commission of a real

estate brokerage affiliate of the bank.

27 12 U.S.C. 2601 et seq.

28Under section 114 of the GLB Act, the Board

has authority to impose restrictions or requirements

on transactions or relationships between a

depository institution subsidiary of a bank holding

company and any affiliate of such depository

institution, if the Board finds that such action

would be (i) consistent with the purposes of

applicable Federal law and (ii) appropriate, among

other things, to avoid adverse effects such as undue

concentration of resources, decreased or unfair

competition, conflicts of interest, or unsound

banking practices. GLB Act Section 114(b). Section

114 provides the OCC with similar authority to

impose restrictions or requirements on transactions

or relationships between a national bank and its

subsidiaries. GLB Act Section 114(a).

29 12 U.S.C. 1843(k)(5)(B)(i), 24a(b)(3)(A). The

GLB Act requires the Agencies jointly to define this

activity and two other listed activities as ‘‘financial

in nature’’ and to determine ‘‘the extent to which

such activities are financial in nature or incidental

to a financial activity.’’ 12 U.S.C. 1843(k)(5)(A),

24a(b)(3).

30 12 U.S.C. 1843(k)(5)(B)(iii), 24a(b)(3)(C).

Board’s capacity to consider the

competitive realities of the U.S.

financial marketplace in determining

the permissibility of activities for FHCs.

As the financial marketplace

continues to evolve, it appears that

many financial companies are adding

real estate brokerage to their menu of

services. In this regard, the ABA has

provided evidence that several

diversified financial companies provide

real estate brokerage services in addition

to their more traditional banking,

securities, and insurance services.23 The

ABA also has asserted that buyers and

sellers of real estate are increasingly

looking to a single company to provide

all of their real estate-related needs.

Purchasers of real estate seem especially

interested in obtaining real estate

brokerage and mortgage finance from a

single provider. The ABA argues that

permitting FHCs and financial

subsidiaries to engage in real estate

brokerage activities would permit FHCs

and banks to compete effectively with

other financial service providers in the

United States. The Agencies solicit

comment on the extent to which U.S.

financial services companies provide

real estate brokerage services.

Existing federal and state laws should

operate to mitigate the potential adverse

effects of combining banking and real

estate brokerage. The antitying rules

should help prevent banks from using

any market power they possess to assist

an affiliated financial subsidiary or FHC

in monopolizing or competing unfairly

in the real estate brokerage business.

The antitying rules would prohibit a

subsidiary bank of a FHC engaged in

real estate brokerage or the parent bank

of a financial subsidiary engaged in real

estate brokerage from extending credit,

furnishing any service, or varying the

consideration for any loan or service on

the condition that the customer obtain

real estate brokerage services from the

bank or any affiliate (including a

financial subsidiary) of the bank.24

Sections 23A and 23B of the Federal

Reserve Act would limit the amount of

credit and certain other forms of support

that a bank could provide to a real estate

brokerage affiliate (including a financial

subsidiary).25 In addition, section 23B

would require mortgage loans by a bank

to a customer who obtains real estate

brokerage services from a bank affiliate

(including a financial subsidiary) to be

on market terms.26 Furthermore, federal

and state consumer protection laws,

including the Real Estate Settlement

Procedures Act,27 would help protect

customers of banks and affiliated real

estate brokers. The Agencies solicit

comment on the potential adverse

effects of allowing FHCs or financial

subsidiaries to act as a real estate broker

and whether special restrictions on

transactions or relationships between a

real estate broker and its affiliated

depository institutions are necessary to

mitigate those adverse effects.28

Permitting FHCs and financial

subsidiaries to engage in real estate

brokerage does not appear to present

significant risks to those organizations

or their depository institution affiliates.

The proposed rules would ensure that

the authorized real estate brokerage

services are agency services only and

that FHCs and financial subsidiaries

take no principal risk in connection

with real estate transactions that they

broker. As a consequence, FHCs and

financial subsidiaries engaging in real

estate brokerage would not be subject to

either the liquidity risk or market risk

associated with real estate investment

and development. Real estate brokerage

involves operational and legal risks, but

these risks appear similar in nature and

extent to those posed by other agency

activities conducted by FHCs and

financial subsidiaries.

2. Real Estate Brokerage as a Statutorily

Listed Financial Activity

The ABA has argued that real estate

is a financial asset and that, accordingly,

the Agencies should find real estate

brokerage to be part of the statutorily

listed financial activity of ‘‘[l]ending,

exchanging, transferring, investing for

others or safeguarding financial assets

other than money or securities.’’29

According to the ABA, real estate is a

financial asset because (i) the home is

the largest asset for many individuals;

(ii) real estate serves as the

underpinning for hundreds of billions of

dollars of mortgage-backed securities;

and (iii) real estate serves as a means of

wealth creation by increasing in value

over time and providing tax benefits.

The Agencies are not convinced that

real estate should be deemed a financial

asset because it is a comparatively large

asset on most individuals’ personal

balance sheet or because it often is used

as collateral for financial instruments.

Airplanes, boats, and automobiles are

large assets that are often used as

collateral for financial instruments

(loans and leases in particular), yet

these assets are generally considered to

be nonfinancial. The Agencies

recognize, however, that real estate does

have certain important attributes of a

financial asset; namely, that individuals

often purchase real estate, at least in

part, for investment purposes and with

a view toward the financial benefits of

the transaction.

These financial attributes of real

estate may, however, not be enough to

justify treating real estate as a financial

asset. Although real estate often is

purchased, in part, for investment

purposes, the same can be said of many

nonfinancial assets such as fine art, rare

stamps, and antique cars. Moreover,

whereas loans, securities, and most

other financial assets are held for

investment purposes only, most

purchasers and renters of real estate also

use the property as a residence or in the

operation of a business. Finally,

financial assets are generally thought to

include money, loans, securities, and

other similar intangible properties. Real

estate, on the other hand, is a tangible,

physical asset.

The ABA also has argued that the

purchase, sale, or lease of real estate is

a financial transaction and that,

accordingly, the Agencies should find

that real estate brokerage is part of the

listed financial activity of ‘‘[a]rranging,

effecting, or facilitating financial

transactions for the account of third

parties.’’ 30 The ABA contends that the

purchase, sale, or lease of real estate is

a financial transaction because it is the

most important, complex, and

financially difficult transaction that

Federal Register / Vol. 66, No. 2 / Wednesday, January 3, 2001 / Proposed Rules 311

31See 36 FR 18427 (Sept. 7, 1971).

32 12 CFR 225.126(g); 58 Federal Reserve Bulletin

652 (1972). As part of the 1987 Proposal, the Board

proposed authorizing a bank holding company to

provide real estate management services in

connection with real estate in which the bank

holding company had an interest. See 52 FR 543

(Nov. 4, 1987); see also 50 FR 4519 (Jan. 31, 1985).

As noted above, the Board never finalized this

proposed rule.

33See OCC Interpretive Letter No. 238, supra.

34See 12 CFR 559.4(e)(3), 584.2–1(b)(8).

35See, e.g., OCC Interpretive Letter No. 238,

supra; OCC Interpretive Letter No. 355, reprinted in

[1985–1987 Transfer Binder] Fed. Banking L. Rep.

(CCH) ¶ 85,525 (Dec. 10, 1985); Bancorp Hawaii,

Inc., 71 Federal Reserve Bulletin 168, 168 n.2

(1985); United Missouri Bancshares, Inc., 64

Federal Reserve Bulletin 415, 417 (1978).

most individuals undertake. The

Agencies are not convinced that the

importance, complexity, or size of a

transaction should affect a

determination as to whether the

transaction is financial in nature. On the

other hand, real estate transactions often

are entered into, at least in part, for

investment purposes. To that extent,

real estate transactions do have some

aspects of a financial transaction. The

Agencies seek comment on the above

issues.

3. Arguments of the NAR

As noted, the NAR has asked that the

Agencies not authorize real estate

brokerage activities. The NAR makes

four principal contentions in support of

its position. First, the NAR notes that

the GLB Act does not specifically

authorize FHCs to engage in real estate

brokerage. Although this contention is

true, the GLB Act also authorizes each

Agency to supplement the statutory

activities list with additional activities

that it determines, in consultation with

the other Agency, to be financial in

nature or incidental to a financial

activity. The NAR points out that the

GLB Act specifically prohibits financial

subsidiaries from engaging in real estate

investment and development activities,

but this prohibition by its terms does

not apply to FHCs or to real estate

brokerage activities.

Second, the NAR suggests that it

would be inappropriate for the Board

now to permit FHCs to provide real

estate brokerage services because the

Board prohibited bank holding

companies from acting as a real estate

broker in 1972. As noted above, the

Board’s 1972 decision on real estate

brokerage was made pursuant to the

former ‘‘closely related to banking’’

standard; the GLB Act now authorizes

the Board to approve any activity that is

‘‘financial in nature’’ or ‘‘incidental to a

financial activity.’’ The plain meaning

of and legislative history behind the

‘‘financial’’ and ‘‘incidental to

financial’’ standards suggest that

Congress intended the new standards to

be significantly broader than the old

‘‘closely related to banking’’ test.

Furthermore, the financial services

environment has changed significantly

in the past 30 years, and what may have

been an inappropriate activity for bank

holding companies in the early 1970s

may be appropriate for the diversified

FHCs of the early 21st century.

Third, the NAR claims that real estate

brokerage is a commercial activity and

not a financial activity. Finally, the NAR

argues that the Agencies should delay

finding real estate brokerage to be a

permissible activity until such time as

FHCs gain experience in conducting the

various other new activities authorized

by the GLB Act.

The Agencies seek comment on

whether real estate brokerage is an

activity that is financial in nature or

incidental to a financial activity. In

addition, the Agencies seek comment on

the particular arguments advanced by

the NAR.

B. Real Estate Management Services

Real estate management is the

business of providing for others day-today management of real estate. Day-today management of real estate could

include procuring tenants; negotiating

leases; maintaining security deposits;

billing and collecting rent payments;

providing periodic accountings for such

payments; making principal, interest,

insurance, tax, and utilities payments;

and generally overseeing inspection,

maintenance, and upkeep of real

property. Real estate management

generally does not involve purchasing,

selling, or owning real estate as

principal. Although some states do not

subject real estate managers to special

licensing laws or regulations, real estate

managers in other states are subject to

the same state licensing laws and

regulations that apply to real estate

brokers.

The Board first proposed allowing

bank holding companies to provide

property management services in

1971.31 For a variety of reasons,

however, including the substantial

volume of negative public comment

received on the proposal, the Board

determined in 1972 that property

management was not closely related to

banking for purposes of the BHC Act.32

Similarly, the OCC has not permitted

national banks to engage in general real

estate management.33

The Agencies have some doubts as to

whether all aspects of real estate

management are financial in nature or

incidental to a financial activity. The

Agencies also are concerned that certain

forms of real estate management appear

to resemble more closely day-to-day

operation of a commercial enterprise

than serving as the intermediary

between the owners and users of real

estate. Nevertheless, for the reasons

discussed below, the Agencies believe

that they should seek public comment

on (i) what activities are included

within real estate management and (ii)

which of these activities, if any, are

financial in nature or incidental to a

financial activity within the meaning of

section 4(k)(1)(A) of the BHC Act and

section 5136A(a)(2)(A)(i) of the Revised

Statutes.

1. General ‘‘Financial in Nature or

Incidental’’ Analysis

Neither the OCC nor state banking

departments, to the Agencies’

knowledge, have permitted banks to

provide general real estate management

services. Thrift holding companies

(including non-unitary thrift holding

companies) and thrift service

corporation subsidiaries, however, have

been permitted to maintain and manage

real estate.34 In addition, as noted

above, banking organizations have long

been engaged in a variety of real estaterelated activities. Moreover, some

(though not all) real estate management

activities appear to be functionally and

operationally similar to various other

activities that banks and bank holding

companies currently engage in. For

example, collecting rental payments;

maintaining security deposits; making

principal, interest, taxes, and insurance

payments; and providing periodic

accountings are functionally similar to

collecting loan or lease payments,

disbursing escrow payments, and

performing related accountings. In

addition, banks and bank holding

companies have a long history of

managing real estate assets that are part

of trust estates, that are used by the

banking organization in its own

operations, or that are acquired as a

result of foreclosure.35

As noted above, in determining

whether an activity is financial in

nature or incidental to a financial

activity, the GLB Act instructs the Board

and the Secretary to consider whether

the activity is necessary or appropriate

to allow FHCs or banks, respectively, to

compete effectively with other financial

services companies operating in the

United States. The ABA has contended

that competitive considerations support

a determination to allow FHCs and

financial subsidiaries to provide real

estate management services. The

Agencies solicit comment on the extent

to which financial services companies

312 Federal Register / Vol. 66, No. 2 / Wednesday, January 3, 2001 / Proposed Rules

36 12 U.S.C. 1843(k)(5)(B)(i), 24a(b)(3)(A).

37 12 U.S.C. 1843(k)(5)(B)(iii), 24a(b)(3)(C).

provide real estate management services

in the United States and on whether

permitting FHCs and financial

subsidiaries to provide real estate

management services would help ensure

competitive equity between FHCs and

financial subsidiaries and other

financial firms.

The same laws that would operate to

mitigate potential adverse effects in the

real estate brokerage context also would

help to alleviate adverse effects in the

provision of real estate management

services. The Agencies solicit comment

on the potential adverse effects of

allowing FHCs and financial

subsidiaries to act as a real estate

manager and whether special

restrictions are necessary to mitigate

those adverse effects.

Permitting FHCs and financial

subsidiaries to engage in real estate

management activities does not appear

to present significant risks to those

organizations or their depository

institution affiliates. The proposed rules

would ensure that the authorized real

estate management services are agency

services only and that FHCs and

financial subsidiaries take no principal

risk in connection with real estate that

they manage. The Agencies recognize,

however, that engaging in property

management may increase the

operational, legal, and reputational risks

faced by a FHC or financial subsidiary.

Accordingly, the Agencies seek

comment on the nature and extent of

these risks.

2. Real Estate Management as a

Statutorily Listed Financial Activity

The ABA has argued that the

Agencies should find that real estate

management is part of the listed

financial activity of ‘‘[l]ending,

exchanging, transferring, investing for

others or safeguarding financial assets

other than money or securities.’’36 If the

Agencies were to conclude that real

estate is a financial asset, this argument

would have some textual appeal. Real

estate management could be viewed, in

part, as a form of safeguarding real

estate.

The ABA also has argued that the

Agencies should find that real estate

management services are part of the

listed financial activity of ‘‘[a]rranging,

effecting, or facilitating financial

transactions for the account of third

parties.’’ 37 Part of the role of a property

manager does involve the facilitation of

financial transactions: For example,

maintenance of security deposits,

collection of rent payments, and

distribution of principal, interest,

insurance, tax, and utility payments.

Property management also, however,

appears to have components that go

beyond the facilitation of financial

transactions. The Agencies seek

comment on the above issues.

C. Description of the Proposed Rules

1. Real Estate Brokerage

The proposed rules authorize FHCs

and financial subsidiaries to provide

real estate brokerage services and

include examples of the sorts of

activities that the Agencies consider to

be included within real estate brokerage.

The Agencies seek comment on whether

any final rules should provide further

guidance regarding the scope of

activities that are included within real

estate brokerage.

Importantly, the proposed rules also

contain restrictions designed to ensure

that a FHC or financial subsidiary, when

acting as a real estate broker, serves only

as an intermediary between buyers and

sellers (or lessees and lessors) and does

not otherwise become impermissibly

involved in the underlying real estate

transaction. In particular, the proposed

rules make clear that they do not

authorize a FHC or financial subsidiary

to (i) invest in or develop real estate; or

(ii) take title to, acquire, or hold an

ownership interest in any real estate

that is the subject of the company’s real

estate brokerage services.

The Agencies understand that many

real estate brokers offer employee

relocation services to their corporate

clients. Certain fundamental employee

relocation services—assisting a client’s

transferred employees to sell their

existing homes, buy homes in their

destination locations, and obtain

mortgage financing for their new home

purchases—appear to be forms of real

estate brokerage or currently permissible

financial activities.

Other employee relocation activities

seem less obviously a part of real estate

brokerage or otherwise financial in

nature. For example, a real estate broker

providing employee relocation services

often commits to purchase any home

owned by one of its client’s transferred

employees at a fixed price if the broker

fails to sell the home within a certain

time period. The Agencies believe that

such services may be incidental to real

estate brokerage if the homes purchased

by the broker are sold within a short

time period, the broker’s total holdings

of unsold real estate do not exceed some

threshold amount, and the broker only

purchases unsold real estate in

connection with providing bona fide

employee relocation services to

customers (not for the purpose of

speculating on the price of real estate).

The Agencies also understand that

employee relocation services often

include assisting transferred employees

to move household goods to their

destination locations and assisting the

spouses of transferred employees to find

employment in their destination

locations.

The Agencies request information on

the kinds of employee relocation

services that real estate brokers

currently provide. The Agencies also

seek comment on whether to permit

FHCs or financial subsidiaries: (i) To

provide employee relocation services as

part of real estate brokerage or

otherwise; (ii) to purchase residential

real estate in connection with providing

employee relocation services and, if so,

what conditions or limits should apply

to such real estate purchases; and (iii) to

assist transferred employees to move

their household goods and to assist the

spouses of transferred employees to find

employment in connection with

providing employee relocation services.

2. Real Estate Management

The proposed rules authorize FHCs

and financial subsidiaries to provide

real estate management services and

include examples of the sorts of

activities that the Agencies consider to

be included within real estate

management.

The ABA has suggested that the

Agencies’ definition of real estate

management should include any

activities that may be defined as ‘‘real

estate management’’ under any state

law. The Agencies generally are

reluctant to delegate to state legislatures

any determinations regarding the scope

of permissible activities for federally

regulated banking organizations.

Nevertheless, the Agencies specifically

solicit comment on whether real estate

management activities should be

defined explicitly to include any

activities that are defined as ‘‘real estate

management’’ under state law. The

Agencies also request comment more

generally on whether any final rules

should contain further guidance

regarding the scope of activities that are

included within real estate

management.

The proposed rules contain

restrictions designed to ensure that a

FHC or financial subsidiary, when

providing real estate management

services, acts only in an agency capacity

as an intermediary between the owners

and users of real estate. In particular,

the proposed rules make clear that real

estate management does not include (i)

investing in or developing real estate; or

Federal Register / Vol. 66, No. 2 / Wednesday, January 3, 2001 / Proposed Rules 313

(ii) taking title to, acquiring, or holding

an ownership interest in any real estate

that the FHC or financial subsidiary

manages. In light of these exclusions,

the Agencies request comment on

whether real estate managers receive

compensation in the form of an equity

or equity-like interest in the managed

real estate and, if so, whether the

Agencies should prevent FHCs that

engage in real estate management from

receiving compensation in this form.

The proposed rules also prevent a

FHC or financial subsidiary that

provides real estate management

services from itself repairing or

maintaining the managed real estate.

The Agencies have doubts as to whether

repair and maintenance of real estate are

activities that are financial in nature or

incidental to a financial activity. The

proposed rules allow a FHC or financial

subsidiary, however, to arrange for a

third party to provide these services.

The Agencies request comment on

whether FHCs and financial subsidiaries

should be limited in their authority to

engage in any other aspects of real estate

management.

The Agencies also seek comment on

whether they should draw any

distinctions between the management of

single-family housing, multi-family

housing, office buildings, institutional

buildings (hotels, hospitals, etc.),

commercial and industrial properties,

and farms. In addition, the Agencies

solicit comment on whether real estate

management should include

management of the air rights above and

the oil and mineral rights beneath

particular parcels of land. As noted

above, the Agencies are concerned that

certain forms of real estate management

may more closely resemble day-to-day

operation of a commercial enterprise

than serving as the intermediary

between the owners and users of real

estate.

Plain Language

Section 722 of the GLB Act requires

the Board to use ‘‘plain language’’ in all

proposed and final rules published after

January 1, 2000. In light of this

requirement, the Board has sought to

present its proposed rule in a simple

and straightforward manner and has

included in the rule examples of

activities that would be permissible

under the proposed rule. The Board

invites comments on whether there are

additional steps the Board could take to

make the proposed rule easier to

understand.

Regulatory Flexibility Act

Pursuant to section 605(b) of the

Regulatory Flexibility Act, the Agencies

certify that the proposed rules would

not have a significant economic impact

on a substantial number of small entities

within the meaning of the Regulatory

Flexibility Act (5 U.S.C. 601 et seq.).

The proposed rules would remove

regulatory restrictions on financial

holding companies and financial

subsidiaries of national banks by

permitting them to engage in real estate

brokerage and real estate management

activities. The proposed rules would

apply to all financial holding companies

and national bank financial subsidiaries,

regardless of their size. The proposed

rules should enhance the ability of

financial holding companies and

financial subsidiaries, including small

financial holding companies and

financial subsidiaries, to compete with

other providers of financial services in

the United States and to respond to

technological and other changes in the

marketplace in which they compete.

Accordingly, a regulatory flexibility

analysis is not required.

Paperwork Reduction Act

In accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C. 3506;

5 CFR part 1320 Appendix A.1), the

Board has reviewed the proposed rule

under the authority delegated to the

Board by the Office of Management and

Budget. No collections of information

pursuant to the Paperwork Reduction

Act are contained in the proposed rule.

List of Subjects

12 CFR Part 225

Administrative practice and

procedures, Banks, Banking, Federal

Reserve System, Holding companies,

Reporting and recordkeeping

requirements, Securities.

12 CFR Part 1501

Administrative practice and

procedure, National Banks, Reporting

and recordkeeping requirements.

Federal Reserve System

12 CFR Chapter II

Authority and Issuance

For the reasons set forth in the joint

preamble, part 225 of chapter II, title 12

of the Code of Federal Regulations is

proposed to be amended as follows:

PART 225—BANK HOLDING

COMPANIES AND CHANGE IN BANK

CONTROL (REGULATION Y)

1. The authority citation for part 225

continues to read as follows:

Authority: 12 U.S.C. 1817(j)(13), 1818,

1828(o), 1831i, 1831p-1, 1843(c)(8), 1843(k),

1844(b), 1972(l), 3106, 3108, 3310, 3331–

3351, 3907, and 3909.

2. Section 225.86(d), published at 65

FR 80740, December 22, 2000, is

amended by adding new paragraphs

(d)(2) and (d)(3) to read as follows:

§ 225.86 What activities are permissible for

financial holding companies?

* * * * *

(d) * * *

(2) Real estate brokerage.

(i) Providing real estate brokerage

services, including, among other things,

acting as an agent for a buyer, seller,

lessor, or lessee of real estate; listing and

advertising real estate; providing advice

in connection with a real estate

purchase, sale, exchange, lease, or rental

transaction; bringing together parties

interested in consummating such a real

estate transaction; and negotiating on

behalf of such parties a contract relating

to such a real estate transaction.

(ii) In providing real estate brokerage

services, a financial holding company

may not:

(A) Invest in or develop real estate as

principal; or

(B) Take title to, acquire, or hold any

ownership interest in real estate

brokered by the company.

(3) Real estate management.

(i) Providing real estate management

services, including, among other things,

procuring tenants; negotiating leases;

maintaining security deposits; billing

and collecting rent payments; providing

periodic accountings for such payments;

making principal, interest, insurance,

tax, and utility payments; and generally

overseeing the inspection, maintenance,

and upkeep of real estate.

(ii) In providing real estate

management services, a financial

holding company may not:

(A) Invest in or develop real estate as

principal;

(B) Take title to, acquire, or hold any

ownership interest in real estate

managed by the company; or

(C) Directly or indirectly maintain or

repair real estate managed by the

company (but may arrange for a third

party to provide these services).

By order of the Board of Governors of the

Federal Reserve System, December 26, 2000.

Jennifer J. Johnson,

Secretary of the Board.

Department of the Treasury

12 CFR Chapter XV

Authority and Issuance

For the reasons set forth in the joint

preamble, part 1501 of chapter XV, title

12 of the Code of Federal Regulations is

proposed to be amended as follows:

314 Federal Register / Vol. 66, No. 2 / Wednesday, January 3, 2001 / Proposed Rules

PART 1501—FINANCIAL

SUBSIDIARIES

1. The authority citation for part 1501

continues to read as follows:

Authority: 12 U.S.C. 24a.

2. Section 1501.2, published in an

interim rule in this issue of the Federal

Register, is amended by adding new

paragraphs (b) and (c) to read as follows:

1501.2 What activities has the Secretary

determined to be financial in nature or

incidental to a financial activity?

(a) * * *

(b) Real estate brokerage.

(1) Providing real estate brokerage

services, including, among other things,

acting as an agent for a buyer, seller,

lessor, or lessee of real estate; listing and

advertising real estate; providing advice

in connection with a real estate

purchase, sale, exchange, lease, or rental

transaction; bringing together parties

interested in consummating such a real

estate transaction; and negotiating on

behalf of such parties a contract relating

to such a real estate transaction.

(2) In providing real estate brokerage

services, a financial subsidiary may not:

(i) Invest in or develop real estate as

principal; or

(ii) Take title to, acquire, or hold any

ownership interest in real estate

brokered by the financial subsidiary.

(c) Real estate management.

(1) Providing real estate management

services, including, among other things,

procuring tenants; negotiating leases;

maintaining security deposits; billing

and collecting rent payments; providing

periodic accountings for such payments;

making principal, interest, insurance,

tax, and utility payments; and generally

overseeing the inspection, maintenance,

and upkeep of real estate.

(2) In providing real estate

management services, a financial

subsidiary may not:

(i) Invest in or develop real estate as

principal;

(ii) Take title to, acquire, or hold any

ownership interest in real estate

managed by the financial subsidiary; or

(iii) Directly or indirectly maintain or

repair real estate managed by the

financial subsidiary (but may arrange for

a third party to provide these services).

Dated: December 26, 2000.

Gregory A. Baer,

Assistant Secretary for Financial Institutions,

Department of the Treasury.

[FR Doc. 01–43 Filed 1–2–01; 8:45 am]

BILLING CODE 6210–01–P

RAILROAD RETIREMENT BOARD

20 CFR Part 369

RIN 3220–AB49

Use of the Seal of the Railroad

Retirement Board

AGENCY: Railroad Retirement Board.

ACTION: Proposed rule.

SUMMARY: The Railroad Retirement

Board (Board) proposes to amend its

regulations to add a part explaining

when use of the Board’s seal is

permitted. Federal law prohibits the use

of an agency seal except as authorized

by regulation. The Board currently has

no such regulation.

DATE: Comments should be submitted

on or before March 5, 2001.

ADDRESSES: Any comments should be

submitted to the Secretary to the Board,

Railroad Retirement Board, 844 North

Rush Street, Chicago, IL 60611.

FOR FURTHER INFORMATION CONTACT:

Marguerite P. Dabado, Assistant General

Counsel, Railroad Retirement Board,

(312) 751–4945, TDD (312) 751–4701.

SUPPLEMENTARY INFORMATION: The

Railroad Retirement Board is an

independent agency in the executive

branch of the United States Government

which is charged with the

administration of the Railroad

Retirement Act (45 U.S.C. 231 et seq.)

and the Railroad Unemployment

Insurance Act (45 U.S.C. 351 et seq.).

Use of agency seals is governed by 18

U.S.C. 701 which prohibits the use of

agency seals except as authorized under

regulations made pursuant to law. This

proscription is intended to protect the

public against the use of a recognizable

assertion of authority with intent to

deceive (U.S. v. Goeltz, 513 F.2d 193

(C.A. Utah 1975), cert. den. 423 U.S.

830). The regulations of the Railroad

Retirement Board do not include

provisions for the authorization of use

of the Agency’s seal. The Board

proposes to add Part 369 to its

regulations to explain when use of the

Board’s seal is permitted.

In order to comply with the

President’s June 1, 1998, memorandum

directing the use of plain language for

all proposed and final rulemaking, the

regulatory paragraphs introduced by the

above rule changes have been written in

plain language.

This rule concerns agency

management and is not a regulation as

defined in Executive Order 12866.

Therefore, no regulatory impact analysis

is required. There are no information

collections associated with this rule.

List of Subjects in 20 CFR Part 369

Railroad retirement, Seals and

insignia.

For the reasons set out in the

preamble, the Railroad Retirement

Board proposes to add part 369 to title

20, chapter II of the Code of the Federal

Regulations to read as follows:

PART 369—USE OF THE SEAL OF THE

RAILROAD RETIREMENT BOARD

Sec.

369.1 Unofficial use of the seal of the

Railroad Retirement Board.

369.2 Authority to grant written permission

for use of the seal.

369.3 Procedures for obtaining permission

to use the seal.

369.4 Inappropriate use of the seal.

369.5 Penalty for misuse of the seal.

Authority: 18 U.S.C. 701; 45 U.S.C. 231f.

§ 369.1 Unofficial use of the seal of the

Railroad Retirement Board.

Use of the seal of the Railroad

Retirement Board for non-agency

business is prohibited unless

permission for use of the seal has been

obtained in accordance with this part.

§ 369.2 Authority to grant written

permission for use of the seal.

The Board hereby delegates authority

to grant written permission for the use

of the seal of the Railroad Retirement

Board to the Director of Administration.

§ 369.3 Procedures for obtaining

permission to use the seal.

Requests for written permission to use

the seal of the Railroad Retirement

Board shall be in writing and shall be

directed to the Director of

Administration of the Railroad

Retirement Board. The request should,

at a minimum, contain the following

information:

(a) Name and address of the requester.

(b) A description of the type of

activity in which the requester is

engaged or proposes to engage.

(c) A statement of whether the

requester considers the proposed use or

imitation to be commercial or noncommercial, and why.

(d) A brief description and illustration

or sample of the proposed use, as well

as a description of the product or

service in connection with which it will

be used. This description will provide

sufficient detail to enable the Director of

Administration to determine whether

the intended use of the seal is consistent

with the interests of the government.

(e) In the case of a non-commercial

use, a description of the requesting

organization’s function and purpose

shall be provided.