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6.8 Intermediate SLHC May be Required

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6.8 Intermediate SLHC May be Required

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6.8.       Intermediate SLHC May be Required.   The Fed may require a grandfathered unitary SLHC that conducts activities other than financial activities to conduct some or all of its financial activities (other than internal financial activities) through an intermediate SLHC.  The Fed may order that an SLHC take such action not later than 90 days after the Transfer Date (subject to extension).  The Fed will be required to order the creation of an intermediate SLHC if it determines that doing so is necessary to appropriately supervise the grandfathered unitary SLHC’s financial activities and to ensure that its supervision does not extend to activities that are not financial in nature.  Formation of an intermediate holding company will not affect adversely the grandfathered SLHC’s grandfathered status or require a grandfathered SLHC to limit its activities.[§626]

6.8.1.  Source of Strength.  A grandfathered unitary SLHC must serve as a source of financial strength to its subsidiary intermediate holding company.
                        6.8.2.   Fed Examination and Enforcement Authority.  The Fed may examine a grandfathered unitary SLHC that controls an intermediate holding company.  The Act provides that the Fed may take enforcement actions against the grandfathered unitary SLHC to ensure compliance with the intermediate holding company requirements. 

The Fed is required to promulgate regulations establishing criteria for determining whether to require the establishment of an intermediate holding company (no timetable is given).  In addition, the Fed may promulgate regulations establishing restrictions or limitations on transactions between an intermediate holding company and its affiliates on one hand and the parent company and its affiliates on the other hand.