Question: A Section 20 subsidiary of a major U.S. bank is planning to underwrite corporate securities and expects to generate $5 million in revenues. It currently underwrites U.S. Treasury securities and general obligation municipal bonds and earns annual fees of $40 million.
a. Is the bank in compliance with the laws regulating the turnover of Section 20 subsidiaries?
b. If it plans to increase underwriting of corporate securities and generate $11 million in revenues, is it in compliance? Would it have been in compliance prior to passage of the Financial Services Modernization Act of 1999?