Toronto Dominion Bank's securities unit has won permission to underwrite and deal in debt and equity securities here in this country.
The bank, which wants a place in the active U.S. market for high-yield securities, is the latest Canadian-owned institution to win such permission.
On Friday, the Federal Reserve Board granted select investment banking powers under section 20 of the Glass-Steagall Act to Toronto Dominion Securities.
Such powers are tightly restricted under the Depression-era law, which prevents cross-ownership of commercial and investment banking businesses.
Canadian commercial banks have shown a strong interest in developing their investment banking business in the more active and liquid United States market.
"It's a natural progression," said Ethan M. Heisler, a fixed income analyst at Salomon Brothers Inc. "Competition in Canada is fierce."
Mr. Heisler said the U.S. investment banking powers are essential to the banks as they try to extend their reach throughout North America.
Industry observers noted that Toronto Dominion is entering the high- yield arena during a much stronger market than last year.
"The timing is better this year than last," said Michael Mueller, a senior vice president at Toronto Dominion Bank.
Mr. Mueller said, however, that the bank entered the business to provide for the long-term needs of its clients.
David McCann, president of the bank's securities arm, said that while the bank received broadly diversified powers including debt and equity underwriting, it remains a niche player, providing a broad range of services to a focused group of relationships.
"We don't want to be all things to all people," said Mr. McCann. "We're not a Wall Street wannabe."
Instead, the bank hopes to create a diversified investment banking enterprise that can build on its lending relationships in industries like cable, communications, forest products, utilities, energy, and health care in the high-yield securities area.
"The high yield business is such a complementary product to lending," said Mr. McCann. "It's just a natural adjunct for those businesses."
All of those businesses have a need for capital and for leverage, said Mr. McCann.
Communications currently accounts for 25% to 30% of the high yield market, which intensifies Toronto Dominion's interest in developing that area, said Mr. McCann.
"We've got fantastic client relationships, and we've got to be able to service their needs," said Mr. Mueller.
Even if Toronto Dominion Securities is not a Wall Street wannabe, it has tapped the street for some of its talent.
New additions include managing director Peter Veru, formerly of Bear, Stearns & Co., who will head the trading operation; managing director Martha Pritchard, formerly of Salomon Brothers, who will lead the sales operation; managing director Mark Grotevant, from Lehman Brothers Inc., who will head research; and managing director Bob Caiati, from Swiss Bank Corp., who will head risk management.
Like other banks that have built investment banking businesses, Toronto Dominion offered attractive compensation packages to lure talent from Wall Street.
Managers of the Canadian bank "demonstrated that they are ambitious and committed. They had no trouble pulling people in from Wall Street ... when they called, the hands readily went up," said one executive-search specialist.
Mr. Mueller said that the bank attracted top quality people, but did not overpay for its talent.
Mr. Mueller said that in putting together the high-yield group he looked for people who were ready to work as a team, and who believed in the benefits of a commercial banking operation.
"The next piece is to underwrite and distribute equity," said Mr. Mueller. He said that probably would not happen before the end of the year.