| March 14, 1996 |
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Harvey N. Bock Dear Mr. Bock: This is in response to your letter regarding the permissibility under the Bank Holding Company Act ("BHC Act") of a proposal by Dean Witter, Discover & Co. ("Dean Witter") to market a share purchase plan. Dean Witter is the parent company of Greenwood Trust Company ("Greenwood Trust"), an institution that became a bank upon the enactment of the Competitive Equality Banking Act of 1987 ("CEBA"). Dean Witter may retain its ownership of Greenwood Trust and not be treated as a bank holding company if Greenwood Trust and Dean Witter observe certain limitations. Dean Witter offers a share purchase and dividend reinvestment plan whereby investors may purchase common stock of Dean Witter directly from Dean Witter and (1) reinvest automatically dividends paid on shares of common stock of Dean Witter, without paying commissions or brokerage fees; (2) make optional cash investments in common stock of Dean Witter of up to $40,000 per calendar year, without paying commissions or brokerage fees; (3) transfer without charge common stock of Dean Witter to this plan for convenience; (4) enroll in this plan by buying shares of Dean Witter directly from Dean Witter, without paying commissions or brokerage fees; and (5) sell through this plan shares of common stock of Dean Witter held in their plan accounts. This plan also provides investors who have customer accounts with Dean Witter Reynolds, Inc., a registered broker-dealer and wholly owned subsidiary of Dean Witter, and who enroll in the plan through Dean Witter Reynolds, the ability to reinvest automatically all dividends paid on shares of common stock of Dean Witter held in their Dean Witter Reynolds accounts, without paying commissions or brokerage fees. You state that Greenwood Trust wishes to provide information about the share purchase and dividend reinvestment plan to its customers, and have asked for an opinion that Greenwood Trust may do so without violating section 4(f)(3)(B)(ii) of the BHC Act (12 U.S.C. � 1843(f)(3)(B)(ii)). Section 4(f)(3)(B)(ii) prevents Greenwood Trust, which became a bank pursuant to CEBA, from offering or marketing products or services of an affiliate that are not permissible for bank holding companies to provide under section 4(c)(8) of the BHC Act (12 U.S.C. � 1843(c)(8)). The Board has previously acknowledged that a bank holding company or one of its subsidiaries may issue and sell shares so long as the company is not engaged principally in this practice.1 Accordingly, it would not be inconsistent with section 4(f)(3)(B)(ii) of the BHC Act for Greenwood Trust to provide to its customers information about Dean Witter's share purchase and dividend reinvestment plan provided that all services provided by the plan relate solely to investment in or the sale of shares of Dean Witter. This opinion is limited to the proposal described above. Any material change in the facts stated above should be communicated to Board staff. If you have any questions, please contact Thomas Corsi (202/452-3275) of my staff.
Sincerely yours,
(signed) J. Virgil Mattingly
J. Virgil Mattingly
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