John W. Hopper
Assistant General Counsel
   and Chief Compliance Officer
AmSouth Bancorporation
Post Office Box 11007
Birmingham, Alabama 35288

Dear Mr. Hopper:

This will respond to your request for guidance regarding whether the prior approval of the Board would be required for certain transactions proposed by AmSouth Bank of Alabama ("AmSouth Bank"), a state member bank wholly-owned by AmSouth Bancorporation, Birmingham, Alabama ("AmSouth"). AmSouth Bank is proposing to form a wholly-owned subsidiary that will acquire a 50 percent ownership interest in a Delaware limited liability company that will act as an investment adviser. The remaining 50 percent ownership interest in the investment adviser will be held by an individual ("shareholder") who will enter into an employment agreement with each investment adviser to supervise the activities of the adviser. The shareholder will serve as president of the investment adviser, and the activities of the investment adviser will be governed by a management committee on which AmSouth and the employee will have equal representation.

You have stated that the investment adviser will advise investment companies, other institutional investors such as pension plans, and sophisticated individuals. Furthermore you have stated that all of the activities of the investment adviser would be permissible for AmSouth Bank to engage in directly, and also would be permissible under Regulation Y for a nonbanking subsidiary of AmSouth.¹

The Board's Regulation Y provides that a state-chartered bank may, without the Board's prior approval under the Bank Holding Company Act, acquire or retain all of the securities of a company that engages solely in activities in which the parent bank may engage, at locations at which the bank may engage in the activity, and subject to the same limitations as if the bank were engaging in the activity directly. 12 CFR 225.22(d)(2).

In this case, AmSouth would (through a wholly-owned subsidiary of AmSouth Bank) own 50 percent of the voting shares of the investment advisory subsidiary and all of the remaining shares would be owned by an employee of the investment advisory subsidiary. The Board, in other cases, and in its Regulation Y, has generally attributed to a company the ownership of shares by a management official of the company. See 12 CFR 225.31(d). In this regard, the investment advisory company is a subsidiary of AmSouth Bank because AmSouth Bank itself owns and controls 50 percent of the shares of the company. Thus, employees of the investment advisory company are considered employees of AmSouth Bank. Accordingly, it would appear consistent with Regulation Y to attribute the ownership interest in the investment adviser that is held by employees of the investment adviser to AmSouth Bank.

In view of the fact that all of the ownership interests in the investment advisory subsidiary of AmSouth Bank would either be held directly by AmSouth Bank or attributed to AmSouth Bank, it is our opinion that the proposal meets the requirements of section 225.22(d)(2) of Regulation Y. Accordingly, neither AmSouth nor AmSouth Bank will need Board approval for AmSouth Bank to acquire an ownership interest in the investment advisory subsidiary provided that all of the other criteria of section 225.22(d)(2) are satisfied.

The conclusion in this letter is based on facts provided by you. A change in these facts may result in a different conclusion. Should you have any questions about this letter, please call Thomas Corsi of my staff at (202/452-3275).

Sincerely, yours

(signed) Scott G. Alvarez

Scott G. Alvarez

cc: A.E. Martin, III
        Assistant General Counsel
        Federal Reserve Bank of Atlanta

Footnotes 1. You stated that none of the investment advisers will engage in retail sales activities or the sale of annuities. Return to text