Investment Company Institute v. Camp

Supreme Court of the United States · 1971 · Administrative Law

Administrative LawBanking RegulationStandingGlass-Steagall Actcompetitor standingzone of interestsGlass-Steagall Actnational banks

Facts

The Comptroller of the Currency promulgated Regulation 9 to authorize national banks to collectively invest monies received under managing agency accounts, and approved First National City Bank's plan to operate such a fund. Under the plan, customers placed money with the bank, received redeemable units of participation representing proportional interests in the fund, and the bank served as underwriter and investment adviser. Before 1963, federal regulators had allowed collective investment only for true fiduciary purposes and had prohibited use of common trust funds as investment trusts attracting money seeking investment alone. The bank's fund was in direct competition with conventional mutual funds.

Issue

Whether the Comptroller may, consistent with the banking laws and specifically §§ 16 and 21 of the Glass-Steagall Act, authorize a national bank to offer customers interests in a stock investment fund created and maintained by the bank. A threshold issue was whether the petitioners had standing to challenge that authorization.

Rule

Competitors have standing to seek judicial review of a Comptroller ruling that authorizes national banks to enter a competing field when they suffer competitive injury and Congress arguably legislated against that competition. Under §§ 16 and 21 of the Glass-Steagall Act, a national bank may not operate an investment fund of the kind at issue where the bank sells participations in a pooled stock fund, because that activity constitutes underwriting, issuing, selling, and distributing securities, and implicates the very hazards Congress sought to prevent by separating commercial banking from investment banking.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

The Comptroller approves a regulation allowing national banks to market redeemable interests in bank-run energy-stock pools to retail customers in Phoenix. Desert Crest Funds, a group of open-end investment companies that already sell competing energy funds in Arizona, sues for judicial review, alleging the new rule will divert customers and fees.

Does Desert Crest Funds most likely have standing to challenge the Comptroller's rule?

Explanation. The majority held that competitors have standing when they suffer injury from competition authorized by the Comptroller, seek review of the scope of national bank powers, and Congress arguably legislated against the challenged competition. The plaintiff need not prove the merits in order to establish standing, nor show that Congress specifically sought to protect competitors as such. The alleged diversion of customers and fees is the same kind of competitive injury the Court recognized.