Document: 468 U.S. 207 104 S.Ct. 3003 82 L.Ed.2d 158 SECURITIES INDUSTRY ASSOCIATION, Petitionerv.BOARD OF GOVERNORS the FEDERAL RESERVE SYSTEM et al. No. 83-614. Supreme Court of United States Argued April 24, 1984. Decided June 28, Syllabus BankAmerica Corp. (BAC), a bank holding company, applied to Federal Reserve Board (Board) for approval under § 4(c)(8) Bank Holding Company Act 1956 (BHC Act) acquire nonbanking affiliate corporation (Schwab) engaged in retail securities brokerage. Section authorizes companies, with prior approval, stock other companies that are non-banking activities determines "so closely related banking . as be proper incident thereto." Petitioner, national trade association brokers, opposed BAC's application and participated administrative hearings. The authorized BAC Schwab, business, such is essentially confined purchase sale account third parties, without providing investment advice purchaser or seller, "closely related" within meaning 4(c)(8). also concluded acquisition would not violate 20 Glass-Steagall Act, which prohibits (BAC's subsidiary here) from being affiliated "engaged principally issue, flotation, underwriting, public sale, distribution" securities. On petitioner's judicial review, Appeals affirmed Board's order. Held: has authority BHC authorize company Pp. 214-221. (a) determination brokerage business limited customers, provision banking, consistent language policies Act. There no express requirement proposed activity must facilitate operations before it may found banking. record substantially supports factual findings Schwab's services were very similar types generally provided by banks particularly well equipped provide services. 214-216. (b) company's prohibited reasonable supported statute's plain legislative history, deserves deference normally accorded construction laws. term "public sale" should read refer underwriting described terms surround it, exclude type Schwab was engaged. This reading statute further long-standing interpretation identical another Moreover, history demonstrates Congress enacted prohibit affiliation commercial entities underwriting. None hazards implicated activities. 216-221. 716 F.2d 92, affirmed. James B. Weidner, New York City, petitioner. Carter G. Phillips, Washington, D.C., respondents. Justice POWELL delivered opinion Court. 1 case presents question whether statutory 1956, 12 U.S.C. 1843(c)(8), 2 * (BAC) theBank Act.1 In March 1982, 100 percent voting shares Charles Corp., engages through its wholly owned subsidiary, & Co. (Schwab), discount brokerage.2 ordered formal hearings held an Administrative Law Judge (ALJ) consider application. Securities Industry Association (SIA), petitioner here, those hearings.3 After six days hearings, ALJ recommended approved. reviewing evidentiary record, adopted, modifications, conclusions Schwab. 69 Fed.Res.Bull. 105 (1983). SIA petitioned Second Circuit review 1848. 3 had acted authorizing court accordingly 92 (CA2 1983). We granted SIA's petition certiorari, 465 1004, 994, 79 227 (1984), now affirm. II 4 unless specifically exempted. principal exemption prohibition That engage 1843(c)(8).4 5 Application exception requires make two separate determinations. First, determine banking.5 If is, amend regulations include permissible activity.6 Next, on case-by-case basis allowing applicant reasonably expected produce benefits outweigh any potential adverse effects. H.R.Conf.Rep. 91-1747, pp. 16-18 (1970), U.S.Code Cong. Admin.News 1970, p. 5519.7 6 this case, offered Relying evidence own expertise, articulated ways currently offer, accommodation their virtually Fed.Res.Bull., at 107.8 cited 1977 study Exchange Commission 7 "bank trust department trading desks, least largest banks, perform same functions, utilize execution techniques, employ personnel general training use facilities brokers do." Ibid. 8 Finally, "sophisticated techniques resources" execute sell orders customers sufficiently widespread justify finding offer Id., 108. these findings, "essentially seller" 117.9 B 9 next determined likely result outweighed possible Specifically, identified increased competition convenience efficiencies bring business. 109-110. As effects, undue concentration resources, decreased competition, unfair competitive prices. 110-114. 10 Act.10 114-116. observed thus subject provisions It held, however, "not member affiliates Act," "consistent letter spirit act." 114. 11 challenges order grounds. argues approve finds will operations. Second, 377, owning entity lacked Schwab.11 III A. Indeed, relevant does specify factors making determination. nature language, therefore, suggests vested considerable discretion weigh variety determining because "operationally functionally organizations services." 107.12 ruling factors. record. 13 Banks long have arranged customers. expressly endorsed traditional service 1933. 16 continue practice "purchasing selling recourse, solely upon order, of, [their] account[s]." 24 Seventh.13 substance performs significantly different 16, been performing years. See 107-109. amendment Regulation Y, added 1983 reflect decision limits "to buying agent customers" "securities dealing research 48 Fed.Reg. 37006 (1983).14 14 committed primary responsibility administering Accordingly, what "is entitled greatest deference." Governors System v. Investment Institute, 450 46, 56, 101 973, 981, 67 36 (1981) (ICI). commendable thoroughness issue here. standard used normal Appeals, properly deferred case. 15 considered rejected argument violates comprises four sections Banking 1933.15 Only one applicable provision, 20, set forth provides part: "[N]o shall manner subsection section 221a title corporation, association, trust, organization distribution wholesale syndicate participation stocks, bonds, debentures, notes, ." (emphasis added). 17 A subsidiaries 20. 221a(b). if principally" listed therein. 18 concedes "issue, argues, applies argument, "Schwab Act." broad power regulate supervise members System. respect, implementing we accord substantial whenever intent. ICI, U.S., 68, S.Ct., 988; Institute Camp, supra, 401 617, 626-627, 91 1091, 1097, 28 367 (1971).16 19 "Public conjunction "issue," "flotation," "underwriting," "distribution" relevance issuing floating securities, "underwriting" traditionally apply function distinctly broker.17 An underwriter acts whereas broker executes agent.18 Under "familiar principle words grouped list given meaning," Third National Impac, Ltd., 432 312, 322, 97 2307, 2313, 53 368 (1977) (footnote omitted), longstanding 32 78. interlocking management employment between "primarily distribution, retail, participation" 78 added).19 January 1936, interpreted kind ruled 21 "[a] who executing behalf others open market referred 32." 22 51, n. (1936). Because §§ contain purposes, part statute, long-accepted 20.20 disputed statute. entirely 23 "activities underwriting." 64, 985; see 630-634, 1098-1100. 1933, believed heavy involvement speculation precipitated "the closings occurred during Great Depression." 61, 984. One most serious threats sound perceived existence affiliates" "devote themselves many cases perilous operations, speculation, maintaining banks' often largely resources parent bank." S.Rep. 77, 73d Cong., 1st Sess., (1933).21 Congressional concern over included both fear funds lost speculative investments suspicion more "subtle hazards" associated encourage unsound practices. 630, 1099.22 Camp here.23 trades only agent, assets vagaries markets. profits depend volume particular Thus, "salesman's stake" trades. cannot increase profitability having extend credit issuers nor encouraging improperly favor depositors' assets. fact allows directly accommodate sort concerned effort secure Nation's risks market. 25 sum, reason disturb purchasing unsolicited for, customer constitute 'public sale' purposes 20." reasonable, IV 26 hold permits firms therefore affirm judgment Appeals. 27 so ordered. operates bank, America. System, parties inform us States. known "discount" low commissions charges. can afford charge lower than full-service analysis, but merely placed addition BAC, Department hearing proponent acquisition. ban ownership to: "(8) after due notice opportunity (by regulation) managing controlling thereto. performance public, greater convenience, gains efficiency, conflicts interests, practices." 1843(c)(8). determination, followed guidelines announced Courier Assn. Governors, 170 U.S.App.D.C. 301, 516 1229 (1975). following demonstrated: "1. "2. operationally equip them service. "3. integrally require specialized form." 313, F.2d, 1237. recognized, do exclusive stated "any factor advance demonstrate close connection relationship banking." 49 806 (1984). CFR 225 (1983) ("Regulation Y"). 225.4 Y contains already When delegated Board. 815 acting application, need applicant's proposal If, involves unlisted activity, itself. determinations above approving conceded unlike intervening traded exchange. found, exchange broker. To extent they 107. Board, comment, subsequently amended here 7746 (proposed published comment); 37003 (final regulation amending 225.4). final activity: "(15) services, pursuant T (12 Part 220), incidental offering custodial individual retirement accounts, cash restricted original). proceedings apparently challenged benefit analysis well. 103-104 SIA, advanced 1970 establishes "functionally standard, exceeded relying merit. initial versions House Senate bills changed test test. 91-1084, (1970); H.R.Rep. 91-387, (1969). Conference Committee, retained version bill. (1970). 73, 990, (1981), significance unclear. clear broadened rather id., 72-76, 990-992. there indication intended preclude consideration functional qualify exemption. arguably 1970. to" (1933) (explaining permit heretofore"). 9, supra. some margin lending, appropriate maintenance. approved when 108-109. respect Those 21, 32, codified respectively 378, Such where, addressed regulatory action none concerns led enactment 988. hand, gave less taken "expressly position level impact [the Act]." 627, 1097. agency "without accompanying statement" "hardly tantamount interpretation" action. 627-628, typical purchases issuer, frequently underwriters. effected underwriters alone, group dealers principals. Underwriters distribute "best efforts" agreement large blocks specific issues banker issuer. technically L. Loss, Regulations 172 (2d ed. 1961). plans, Most all aspects various times underwriters, dealers, brokers. dealer, firm buys sells thereby assuming risk loss. broker, transactions, customer, firm, bears participate "No officer, director, employee unincorporated partner partnership, individual, primarily syndicated participation, serve time bank. phrase stock, equivalent unpersuasive. dissimilar phrases coterminous. permissive accurately describes clearly distinguishes "dealing in, securities" elsewhere section. engaging latter description appears nowhere occasion Hearings S.71 Subcommittee Committee Currency, 71st 3d 1052-1068 (1931). case: "The shows mind repeatedly focused subtle arise goes beyond fiduciary enters either establishing investments." 1098. 631-634, 1099-1100 (identifying firms). All attributable promotional pressures account.

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