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What is a Financial Subsidiary? A Comprehensive Legal Overview
Definition & meaning
A financial subsidiary is a company that is controlled by one or more insured depository institutions, such as banks. However, it does not include subsidiaries that only engage in activities permissible for the state member bank to conduct directly, or those specifically authorized by federal law to be controlled by the bank. Additionally, any company that is directly or indirectly controlled by a financial subsidiary is also considered a financial subsidiary.
Table of content
Legal use & context
The term "financial subsidiary" is primarily used in banking and finance law. It is relevant in contexts involving the operations of state member banks and their ability to engage in various financial activities through subsidiaries. Users may encounter this term when dealing with legal forms related to banking regulations, compliance, and corporate governance, particularly when considering the formation or management of financial subsidiaries.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A state member bank establishes a subsidiary that offers investment services, which is permitted under federal law. This subsidiary is classified as a financial subsidiary.
Example 2: A bank creates a subsidiary to manage its real estate investments. If this activity is not directly allowed for the bank, the subsidiary would qualify as a financial subsidiary. (hypothetical example)
Relevant laws & statutes
Key statutes related to financial subsidiaries include:
12 U.S.C. 335 - Federal Reserve Act, Section 9
12 U.S.C. 601-604a, 611-631 - Sections 25 and 25A of the Federal Reserve Act
12 U.S.C. 1861 et seq. - Bank Service Company Act
Comparison with related terms
Term
Definition
Difference
Subsidiary
A company controlled by another company.
Financial subsidiaries are specifically related to financial institutions and their regulatory framework.
Insured depository institution
A bank or savings association that is insured by the FDIC.
Financial subsidiaries are controlled by these institutions but have distinct operational guidelines.
Common misunderstandings
What to do if this term applies to you
If you are involved with a financial subsidiary or are considering establishing one, it is crucial to understand the regulatory requirements. Users can explore US Legal Forms for ready-to-use legal templates that can assist in compliance and documentation. If your situation is complex, consulting a legal professional is advisable to ensure compliance with all applicable laws.
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