A Section 20 subsidiary of a major U.S. bank is planning to underwrite corporate securities and expects to generate $5 million in revenues. It currently underwrites U.S. Trea- sury securities and general obligation municipal bonds and earns annual fees of $40 million. (LG 13-3)

a. Is the bank in compliance with the laws regulating the turnover of Section 20 subsidiaries?

b. If it plans to increase underwriting of corporate securi- ties and generate $11 million in revenues, is it in compli- ance? Would it have been in compliance prior to passage of the Financial Services Modernization Act of 1999?