Investment Co. Institute v. Camp

PETITIONER: Investment Co. Institute
LOCATION: Arizona Dept of Public Welfare

DECIDED BY: Burger Court (1970-1971)
LOWER COURT: United States Court of Appeals for the District of Columbia Circuit

CITATION: 401 US 617 (1971)
ARGUED: Dec 14, 1970 / Dec 15, 1970
DECIDED: Apr 05, 1971

Facts of the case


Media for Investment Co. Institute v. Camp

Audio Transcription for Oral Argument - December 14, 1970 in Investment Co. Institute v. Camp

Audio Transcription for Oral Argument - December 15, 1970 in Investment Co. Institute v. Camp

Hugo L. Black:

Mr. Cox.

Archibald Cox:

Mr. Justice Black, may it please the Court.

Yesterday, I pointed out that since the Federal Reserve Act of 1913, managing other people’s money’s in various fiduciary capacities has been a traditional banking function.

And that the individual managing agency account has been one way of performing that function along with testamentary trust, inter vivos trust, executorships and the like and other forms of agency.

In the beginning, the Federal Reserve Board followed the common law and forbade National Banks to commingle the assets of different beneficiaries or different principles.

About 1920, it began relax that rule.

And in 1937, there came a major relaxation that permitted the commingling of the 101 of different trust executorships and guardianships and the like.

And under that new regulation, the now familiar common trust fund grew and flourished.

Partly, I think because the economies of commingling which reduced the management cost and partly because of the advantages of diversification.

Potter Stewart:

And that you say goes back to 1913.

Archibald Cox:

The statute goes back to 1913.

The commingling was not authorized until about 1920 then on a very small scale.

And then commingling on the scale that we’re all familiar with for the common trust fund came in 1937.

But in 1937, the rule was not relaxed so far as individual managing agency accounts are concerned.

It was relaxed for all other fiduciary capacity.

Potter Stewart:

That is for Inter-Vivo trustees or Testamentary trustees and what Bank --

Archibald Cox:

Executorships, guardianships and the like.

Potter Stewart:

It could participate in a commingled fund for various --

Archibald Cox:

Managed by the banks of course.

Potter Stewart:

In executorships, right.

Archibald Cox:


The effect of Regulation 9 which is an issue in the next case is to extend to managing agencies, the same privilege to commingle that it proved to be successful and so free from abuse in the case of trust and that kind of fiduciary capacity.

Indeed, if you will look -- when you come to look at Regulation 9, you would see that it treats commingling strict trust funds and managing agency funds in exactly parallel capacity.

The reasons for this were very well stated somewhat later by the Federal Reserve Board in a letter to the Congress speaking of the public interest in having banks continue to offer this kind of managing agency commingled investment account and a letter quoted in the back of our brief on page 35 (a).

We had pointed out that there were three advantages.

First, this was a means of performing a traditional banking function more efficiently and at less cost.

Second, that it provided competition for the mutual funds which of course in these cases are seeking to preserve a monopolistic or quasi-monopolistic position free from competition.

And third, that in special cases, it enabled a combination of investment and other special fiduciary services.

During the time that Regulation 9 was under consideration, the Securities in Exchange Commission took the position that any commingled fund of managing agency accounts would be subject to the Investment Company Act.

It said that the interest in the fund would be securities, that the fund or the bank would be an issuer or underwriter and that consequently, there had to be registration under the Investment Company Act.