PNC Bank 2009 Annual Report Download - page 12

S ECURITIES AND R ELATED R EGULATION
The SEC, together with either the OCC or the Federal
Reserve, regulates our registered broker-dealer subsidiaries.
These subsidiaries are also subject to rules and regulations
promulgated by the Financial Industry Regulatory Authority
(FINRA), among others.
Several of our subsidiaries are registered with the SEC as
investment advisers and provide services both directly to
clients and to PNC affiliates and related entities, including
registered investment companies. Our investment advisor
subsidiaries are subject to the requirements of the Investment
Advisers Act of 1940, as amended, and the SEC’s regulations
thereunder. The principal purpose of the regulations
applicable to investment advisers is the protection of clients
and the securities markets, rather than the protection of
creditors and shareholders of investment advisors. The
regulations applicable to investment advisers cover all aspects
of the investment advisory business, including limitations on
the ability of investment advisers to charge performance-based
or non-refundable fees to clients; record-keeping; operational,
marketing and reporting requirements; disclosure
requirements; limitations on principal transactions between an
adviser or its affiliates and advisory clients; as well as general
anti-fraud prohibitions. These investment advisory
subsidiaries also may be subject to state securities laws and
regulations.
In addition, our investment advisory subsidiaries that are
investment advisors to registered investment companies and
other managed accounts are subject to the requirements of the
Investment Company Act of 1940, as amended, and the SEC’s
regulations thereunder, including PNC Capital Advisors, LLC,
a wholly-owned subsidiary of PNC Bank, N.A. and registered
investment advisor. GIS is subject to regulation by the SEC as
a service provider to registered investment companies.
Over the past several years, the SEC and other governmental
agencies have been investigating the mutual fund and hedge
fund industries, including PNC Capital Advisors, LLC, GIS
and other industry participants. The SEC has proposed various
rules, and legislation has been introduced in Congress,
intended to reform the regulation of these industries. The
effect of regulatory reform has, and is likely to continue to,
increase the extent of regulation of the mutual fund and hedge
fund industries and impose additional compliance obligations
and costs on our subsidiaries involved with those industries.
Under provisions of the federal securities laws applicable to
broker-dealers, investment advisers and registered investment
companies and their service providers, a determination by a
court or regulatory agency that certain violations have
occurred at a company or its affiliates can result in fines,
restitution, a limitation on permitted activities, disqualification
to continue to conduct certain activities and an inability to rely
on certain favorable exemptions. Certain types of infractions
and violations can also affect a public company in its timing
and ability to expeditiously issue new securities into the
capital markets. In addition, certain changes in the activities of
a broker-dealer require approval from FINRA, and FINRA
takes into account a variety of considerations in acting upon
applications for such approval, including internal controls,
capital, management experience and quality, prior
enforcement and disciplinary history and supervisory
concerns.
Our securities businesses with operations outside the United
States, including BlackRock and GIS, are also subject to
regulation by appropriate authorities in the foreign
jurisdictions in which they do business.
BlackRock has subsidiaries in securities and related
businesses subject to SEC and FINRA regulation, as described
above, and a federally chartered nondepository trust company
subsidiary subject to the supervision and regulation of the
OCC. For additional information about the regulation of
BlackRock, we refer you to the discussion under the
“Regulation” section of Item 1 Business in BlackRock’s most
recent Annual Report on Form 10-K, which may be obtained
electronically at the SEC’s website at www.sec.gov.
COMPETITION
We are subject to intense competition from various financial
institutions and from non-bank entities that engage in similar
activities without being subject to bank regulatory supervision
and restrictions.
In making loans, PNC Bank, N.A. competes with traditional
banking institutions as well as consumer finance companies,
leasing companies and other non-bank lenders, and
institutional investors including CLO managers, hedge funds,
mutual fund complexes and private equity firms. Loan pricing,
structure and credit standards are extremely important in the
current environment as we seek to achieve risk-adjusted
returns. Traditional deposit activities are subject to pricing
pressures and customer migration as a result of intense
competition for consumer investment dollars.
PNC Bank, N.A. competes for deposits with the following:
• Other commercial banks,
• Savings banks,
• Savings and loan associations,
• Credit unions,
• Treasury management service companies,
• Insurance companies, and
• Issuers of commercial paper and other securities,
including mutual funds.
Our various non-bank businesses engaged in investment
banking and private equity activities compete with the
following:
• Commercial banks,
• Investment banking firms,
• Merchant banks,
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