Vanderbilt Law Review


H. Lee Barfield

First Page



For many years, commercial banks bought and sold common stock while acting in an agency capacity for their customers. Frequently, these transactions were made while the bank was acting as trustee or as custodian for its beneficiaries or principals. Generally,the banks did not advertise this service extensively, but limited promotional activities to prior bank customers. In 1973, a dramatic change began as several commercial banks, notably Security Pacific National Bank of Los Angeles and Chase Manhattan of New York,began to promote this service vigorously in advertising addressed to the general public through the various media. Threatened by the increased competition for the investor's dollar, the mutual fund industry, the broker-dealer community, and the stock exchanges immediately challenged the legality of this service by petitioning to the office of the Comptroller of the Currency. The Comptroller ruled in June 1974 that the banks' investment service was not proscribed by sections 16 and 21 of the Glass-Steagall Act of 1933.

This Note will examine one of the first legal hurdles that an agency stock service must surmount--whether such a service is permitted under the relevant banking laws-sections 16 and 21 of the Glass-Steagall Act. Pursuant to this examination, this Note will focus on the following areas: (1) The legal restrictions currently imposed on national banks' buying and selling common stock; (2) The history of national banks' acting as agents for customers in stock transactions; (3) The policies restricting an agency service as stated by the Supreme Court in Investment Company Institute v. Camp; (4) The Comptroller's opinion approving the service; and (5) An analysis of the arguments on legality of such a service under sections 16 and 21 of the Act.

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