Merchant Banking Investments: Balancing Portfolio Oversight with Operating Restrictions

Merchant banking authority granted under the Gramm-Leach-Bliley Act gives Financial Holding Companies (“FHCs”) – superstar Bank Holding Companies that elect to become FHCs – powerful investment capabilities, but it comes with a fundamental tension. Under 12 CFR 225.171, an FHC may not “routinely manage or operate” a portfolio company held under merchant banking authority. Yet, … Continue reading “Merchant Banking Investments: Balancing Portfolio Oversight with Operating Restrictions”