The Charles Schwab Corporation and Includable Subsidiaries - Page 5

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                On March 31, 1987, Charles R. Schwab, through CL Acquisition                 
          Corp. (currently known as The Charles Schwab Corp.), purchased                     
          from BankAmerica the stock of The Charles Schwab Corp. (formerly                   
          BBC and currently known as Schwab Holdings, Inc.), and its wholly                  
          owned subsidiary, Schwab & Co., in a management-led leveraged                      
          buyout.                                                                            

          Commission Income Issue                                                            

                One of petitioner's primary sources of revenue is commission                 
          income, which is earned by effecting sales and purchases of                        
          stocks and other securities for its customers in a rapid,                          
          efficient, and cost effective manner.                                              
                The primary service performed by petitioner in effecting                     
          sales and purchases of stocks and securities on behalf of                          
          customers is the execution of trade orders.  Petitioner does not                   
          engage in many of the other activities in which full-commission,                   
          full-service brokerage firms engage, such as underwriting,                         
          market-making, arbitrage, research, and portfolio management.                      
          Petitioner also does not solicit transactions in any particular                    
          security and does not offer investment advice to its customers                     
          about the nature, potential value, or suitability of any                           
          particular security.  Nor does petitioner exercise any                             
          discretionary authority over customer accounts or, with certain                    
          limited exceptions, engage in principal transactions in any                        
          security.                                                                          




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Last modified: May 25, 2011