Definition of 'Securities Subsidiary'
A company that is controlled by a large bank or financial holding company. These firms are in the business of underwriting commercial paper and other securities that will then be sold to investors. In certain regions, security subsidiaries can conduct full brokerage operations.
Investopedia explains 'Securities Subsidiary'
Securities subsidiaries were created when the Federal Reserve Board allowed securities firms owned by banks to begin dealing in commercial paper and municipal fixed-income securities on a limited basis. They were permitted to expand their operations into underwriting stocks and corporate bonds in 1990. Their underwriting was initially limited to 5% of bank revenue and was later raised to 25% before the restrictions were completely abolished in 1999.
Security subsidiaries are currently being established around the world.