Company Name: Signet Banking Corp.
Public Availability Date: Feb. 14, 1995

INQUIRY LETTER

MCGUIRE WOODS BATTLE & BOOTHE LLP

ONE JAMES CENTER

901 EAST CARY STREET

RICHMOND, VIRGINIA 23219-4030

(804) 775-1000

February 09, 1995

Via Federal Express

Office of Chief Counsel

Division of Corporation Finance

Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, D.C. 20549

Re: Proposed Spinoff of Capital One Financial

Corporation by Signet Banking Corporation

Ladies and Gentlemen:

We are counsel to Signet Banking Corporation, a Virginia corporation ("Signet"), in connection with a proposed distribution (the "Spinoff") of approximately 88.5% of the outstanding shares of common stock of its subsidiary Capital One Financial Corporation, a Delaware corporation ("Capital One" or the "Company"), to the holders of Signet common shares, as a tax-free dividend without consideration. The Spinoff is part of a plan of restructuring and reorganization and is presently expected to occur by February 28, 1995. The Spinoff follows the primary initial public offering (the "IPO") of approximately 10.8% of the common stock of Capital One (the "Capital One Common Stock") on November 22, 1994. The Signet Board of Directors has authorized management to proceed with all actions preparatory to the Spinoff, subject to certain conditions.

We respectfully request that the staff of the Division of Corporation Finance:

(i) either (a) concur in our opinion that, for purposes of Section 2(3) of the Securities Act of 1933 (the "Securities Act"), the Spinoff would not constitute an "offer," "offer to sell," "offer for sale" or "sale" of the Capital One Common Stock to be distributed to Signet common shareholders or (b) confirm that the staff will not recommend that the Securities and Exchange Commission (the "Commission") take enforcement action if the Spinoff is effected without registration under the Securities Act;

(ii) concur in our opinion that the shares of Capital One Common Stock to be received by Signet common shareholders in connection with the Spinoff will not be deemed to be "restricted securities" within the meaning of Rule 144(a)(3) of the Securities Act and that "affiliates" (as defined in Rule 144) of Capital One will be able to resell under Rule 144 any shares of Capital One Common Stock received in the Spinoff without regard to the holding period provisions of the Rule 144(d); and

(iii) either (a) concur in our opinion that the sale of shares of Capital One Common Stock by an independent agent to provide cash to Signet common shareholders in lieu of any fractional shares resulting from the Spinoff will not require registration of such shares under the Securities Act or (b) confirm that the staff will not recommend that the Commission take enforcement action if such shares are sold without such registration.

I. Background

Signet is a registered bank holding company, incorporated in Virginia, and had consolidated assets of $11.0 billion as of September 30, 1994. On the basis of total assets and deposits at December 31, 1993, Signet is the second largest banking organization headquartered in Virginia. Signet provides interstate financial services through three principal subsidiaries: Signet Bank/Virginia, headquartered in Richmond, Virginia; Signet Bank/Maryland, headquartered in Baltimore, Maryland; and Signet Bank N.A., headquartered in Washington, D.C. The following equity securities of Signet are registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and are listed on the New York Stock Exchange ("NYSE"): common stock, $5.00 par value and rights to purchase Series A Junior Participating Preferred Stock, $20.00 par value. As of September 30, 1994, 58,477,850 shares of Signet Common Stock were issued and outstanding. Signet has advised us that it is current in its reporting obligations under the Exchange Act.

Capital One is a non-bank holding company whose sole subsidiary is Capital One Bank, a Virginia state member limited purpose credit card bank (the "Bank"). The Bank acquired substantially all of the assets and liabilities of Signets credit card operations (the "Division"), including all credit card servicing capabilities, in a transaction consummated on November 22, 1994 (the "Separation"). The Bank, as the successor to the Division, is one of the oldest continually operating bank card issuers in the U.S., having commenced operations in 1953, the same year as the formation of what is now MasterCard International. The Bank is among the 15 largest issuers of Visa and MasterCard credit cards in the United States based on managed loans outstanding as of December 31, 1993. During the five years ended December 31, 1993, the Divisions managed loan portfolio grew at a 41% compound annual rate from $870 million at year end 1988 to $4.8 billion. As of September 30, 1994, the Division had managed loans outstanding of approximately $6.7 billion and approximately 4.8 million credit card accounts.

II. The Restructuring and Reorganization.

A. Background.

On July 26, 1994, Signet announced that its board of directors had approved a plan of restructuring and reorganization that involves the following transactions: (1) the Separation, (2) the IPO and (3) the Spinoff of the Capital One Common Stock owned by Signet to Signets common shareholders as a tax-free dividend.

In connection with the Separation, Capital One completed the IPO, pursuant to which Capital One sold to the public 7,125,000 shares of Capital One Common Stock at an initial offering price of $16.00 per share. The shares of Capital One Common Stock sold in the IPO were registered on Form S-1 (Registration No. 33-82032) (the "Form S-1"). A registration statement on Form 8-A with respect to the Capital One Common Stock was declared effective November 15, 1994. A copy of the final prospectus, dated November 15, 1994, with respect to the IPO (the "Prospectus"), is attached to this letter as Exhibit A. As of November 22, 1994, 66,067,250 shares of Capital One Common Stock were issued and outstanding and were comprised of the 7,125,000 shares issued in connection with the IPO, 58,477,850 shares owned by Signet and 464,400 shares of restricted stock issued to Fairbank Morris, Inc., a corporation controlled by the Chief Executive Officer and Chief Operating Officer of Capital One, in connection with the Separation. The shares of Capital One Common Stock are listed on the NYSE.

For the purpose of governing certain relationships between Signet and Capital One following the Separation, the IPO and the Spinoff, Signet and Capital One have entered into various agreements (the "Transition Agreements") which are described in more detail in the Prospectus under the headings "Arrangements Between the Company and Signet Relating to the Separation and Distribution" and "Management -- Employee Benefits Allocation Agreement," the provisions of which are incorporated herein by reference. The terms of the various Transition Agreements vary depending upon the type of service provided but generally do not extend beyond September 30, 1996. The compensation arrangements under the Transition Agreement were negotiated on an arms length basis.

Signet and Capital One Bank agreed in the Separation Agreement and Retained Portfolio, Origination, Servicing and Management Agreement that Signet would retain and not transfer to Capital One Bank as part of the Separation credit card accounts having outstanding principal balances aggregating approximately $335 million (the "Retained Portfolio"). The Retained Portfolio generally consists of accounts of customers located in Signets Virginia, Maryland and District of Columbia banking market area that have other banking relationships with Signet that would have been jeopardized if such accounts had been transferred to Capital One Bank. The Retained Portfolio constitutes an immaterial amount of the more than $7 billion of on and off balance sheet receivables generated by the credit card business, the accounts relating to which were transferred in the Separation. Signet agreed not to compete with Capital One in direct marketing solicitations in the general purpose bank credit card business outside of the Virginia, Maryland and District of Columbia region for two years after the Separation.

Prior to the Separation, Signet, generally through its credit card business, conducted selected test solicitations with respect to certain consumer finance non-card products, including home equity products, mortgages, installment loans, auto loans and student loans, employing information-based strategies similar to those transferred to Capital One in connection with the Separation. Signet agreed in the Non-Card Products Agreement to continue soliciting such non-card products for the account of Capital One for a period ending on the earlier of 15 months after the Separation or the date on which the amount of such non-card products originated equals $500 million. Because of the restrictions on business imposed on Capital One Bank as a result of being a limited purpose credit card bank, it could not conduct directly the lines of business subsumed by the non-card products. The Non-Card Products Agreement was designed to permit Capital One Bank to benefit from continuing to generate solicitations of such non-card products, without interruption, until Capital One could create or acquire another subsidiary or other subsidiaries to originate and house those products directly.

Prior to the Separation, the credit card division of Signet originated several hundred million dollars of secured deposit accounts, which generally are credit card accounts secured by retail deposit accounts and which secured card receivables were transferred to Capital One Bank. Because Capital One Bank does not have the power as a limited purpose credit card bank to hold retail deposits, Signet agreed in the Secured Card Agreement to act as collateral agent with respect to deposits in which Capital One retains a security interest in connection with secured card accounts. The Secured Card Agreement was designed to permit Capital One Bank to continue in the secured credit card business, without interruption, until such time as Capital One could create or acquire another subsidiary which could hold the retail deposits securing the secured card accounts.

B. The Spinoff.

Virginia law does not require approval of the Spinoff by the shareholders of Signet, and Signet does not expect to seek such approval. The Spinoff will occur without any consideration being paid by any Signet shareholder. In addition, the Spinoff is intended to be tax-free to Signet shareholders. Consummation of the Spinoff is contingent upon, among other things, obtaining an opinion of tax counsel that the Spinoff will be tax-free.

The Spinoff will be made on a pro rata basis to the holders of Signet common shares of record as of February 10, 1995 (the "Record Date"). The distribution ratio is expected to be approximately one-to-one, but to the extent that the distribution ratio will result in fractional shares of Capital One Common Stock, such fractional shares will be aggregated and sold and the proceeds will be remitted to Signet common shareholders who would otherwise have received fractional Capital One shares. An agent that is independent of Signet and Capital One will conduct the sales on behalf of such shareholders.

C. Business Purpose of the Spinoff.

As discussed in detail in the Prospectus under the heading "The Separation and Distribution," the Signet Board of Directors concluded that the most effective means of raising capital for its the credit card business in the future, and enhancing the potential business success of Signets national credit card business and its core, regional-based banking businesses, thereby maximizing long-term values for Signets stockholders, was to effect a full separation of these businesses through the Separation, the IPO and the Spinoff. The Signet Board of Directors also considered the importance of senior management to the success of Signets credit card operations and the benefits of providing them with a meaningful direct equity interest in those operations. The Signet Board of Directors believes that the Spinoff will create two independent financial institutions, each possessing substantial financial and managerial strength and each pursuing separate and attractive long-term business strategies. Signet does not believe that the Transition Agreements, which are limited in term and scope, detract from the valid business purpose of the Spinoff.

III. Analysis.

A. Sections 2(3) and 5 of the Securities Act.

For the reasons set forth below, we believe that the staff should either (i) concur in our opinion that the Spinoff would not constitute an "offer," "offer to sell," "offer for sale" or "sale" of the Capital One Common Stock to be distributed to Signet common shareholders under Section 2(3) of the Securities Act or (ii) confirm that the staff will not recommend that the Commission take enforcement action if the Spinoff is effected without registration under the Securities Act.

1. Substance of Distribution

Unless an exemption is available, Section 5 of the Securities Act requires registration prior to any offer or sale of securities. The term "offer" is defined in Section 2(3) of the Securities Act to include every "attempt or offer to dispose of . . . a security . . . for value" (emphasis supplied) and the term "sale" is defined in the same section to include any "disposition of a security . . . for value" (emphasis supplied). In our opinion, the Spinoff would constitute neither an offer to sell nor a sale of securities within the meaning of Section 2(3), and registration of such shares of Capital One Common Stock would thus not be required because, among other reasons, there would be no disposition of securities for value. Instead, the Spinoff would take the form of a special dividend to Signet common shareholders who would exchange no consideration for the shares of Capital One Common Stock received and would make no investment decision in connection with the Spinoff.

The Commission has taken the position that a dividend of securities, like a dividend of cash, generally does not constitute a "sale" within the meaning of Section 2(3) because such dividend does not constitute a disposition "for value" within the meaning of that section. See, e.g., Release 33-929 (July 29, 1936). The underlying policy rationale for this position is that a shareholder who receives a spinoff dividend does not make an independent investment decision or give any consideration in exchange for the securities received, and therefore does not need the protection afforded by the Securities Act.

In unconventional spinoffs, however, the Commission and the courts have taken the position that shares of the spun-off subsidiary must be registered under the Securities Act. In Release No. 33-4982 (July 2, 1969), the Commission expressed concern in the case where a non-public company with little business activity issues shares to a public company for nominal consideration, and where the public company subsequently distributes those shares to its shareholders. In such a case, a public market for such securities is created with little or no information about the issuer being made available to the investing public. The Commission expressly noted that its concern did not extend to "more conventional spin offs." In SEC v. Datronics Engineers, Inc., 490 F.2d 250 (4th Cir. 1973), cert. denied, 416 U.S. 937 (1974), and SEC v. Harwyn Industries Corporation, 326 F. Supp. 943 (S.D.N.Y. 1971), the courts interpreted Section 2(3) broadly to satisfy the disclosure objectives of the Securities Act, and found dispositions for value in connection with certain contrived spin-off transactions which also involved alleged securities frauds. In Datronics and Harwyn, neither corporation making the distribution was an Exchange Act reporting company prior to the distribution or had a demonstrable business purpose for the spin-off transaction. Each created public trading markets in the securities distributed while furnishing incomplete or misleading information to the public.

In Datronics, Harwyn and Release No. 33-4982, the Commission and the courts relied on policy considerations to support a liberal interpretation of Section 2(3) of the Securities Act in connection with contrived spinoffs. We do not believe these policy considerations are present in the case of the proposed Spinoff. First, as discussed above, the Spinoff is motivated by legitimate business reasons. Second, ample information is currently available to the investing public regarding the affairs of both companies. As noted above, both Signet and Capital One are reporting companies under the Exchange Act with securities listed on the NYSE. In short, the proposed Spinoff is, in form and substance, a bona fide dividend. As such, the Spinoff should not be subject to Section 5 of the Securities Act.

The staff has issued many "no action" letters concerning distributions of shares of publicly-held subsidiaries which are similar to the proposed Spinoff. See, e.g., Pacific Telesis Group (avail. February 14, 1994); Dean Witter, Discover & Co. (avail. May 21, 1993) ("Dean Witter, Discover"); Ethyl Corporation (avail. April 21, 1993) ("Ethyl"); U.S. Healthcare, Inc. (avail. May 4, 1992); First Mississippi Corporation (avail. May 16, 1990) ("First Mississippi"); BSN Corp. (avail. December 24, 1987) ("BSN"); VWR Corporation & Penwest, Ltd. (avail. September 22, 1986); Medicore, Incorporated (avail. October 15, 1986) ("Medicore"); Standard Shares, Inc. (avail. October 21, 1985) ("Standard Shares"). In each instance, the staff took a no-action position with respect to the unregistered distribution of securities to existing shareholders for no consideration where (i) the distribution was pro rata and only existing shareholders received shares as part of the transaction, (ii) there was a legitimate business purpose for the distribution, and (iii) both the distributing and the distributed companies were reporting companies and were current in their Exchange Act reporting obligations. The Staff should assume that each of these conditions will be satisfied in connection with the Spinoff.

Based on the foregoing, we ask that the staff concur in our opinion that the Spinoff can be accomplished as contemplated above without registration under Section 5 of the Securities Act. If the staff is unable to concur, we request that the staff conclude that it will not recommend any enforcement action to the Commission if the Spinoff is made as outlined above without registration under the Securities Act.

2. Form of Distribution

We believe that the Spinoff may be effected without registration of the Capital One Common Stock under the Securities Act and without furnishing any particular form of information statement to Signet common shareholders. This is in accordance with the overall purpose of the Securities Act "to provide adequate disclosure to members of the investing public," Harwyn, 326 F. Supp. at 954, and with the staffs views in each of the no-action letters cited in the previous paragraph, all of which involved the spinoff of a publicly-held subsidiary. In none of these no-action letters was the staffs no-action position conditioned on the delivery of any specific form of disclosure document to the shareholders of the parent company.

In contrast, in circumstances where the "spun-off" entity had not previously been a reporting company, the staff has taken a no-action position only when the shareholders receiving the distribution received an information statement relating to the spun-off company. See, e.g., Eastman Kodak Company (avail. November 5, 1993); Harcourt General, Inc. (avail. November 5, 1993); MEDIQ, Inc. (avail. October 13, 1993); Kimmins Environmental Service Corporation (avail. August 11, 1992); Home Shopping Network, Inc. (avail. July 31, 1992); Control Data Corporation (avail. July 30, 1992); The Penn Central Corporation (avail. June 24, 1992); Johnson Controls, Inc. (avail. September 13, 1991) ("Johnson Controls"); Quaker Oats Company (avail. September 11, 1990) ("Quaker Oats"). Similarly where the distributing company was exempt or otherwise not subject to the reporting obligations of the Exchange Act, the staff has taken a no-action position only if an information statement or substantially similar document was to be distributed to the shareholders receiving the spinoff dividend. See, e.g., Bowater Incorporated (avail. June 18, 1984) (distributing company exempt from Section 12(g) of the Exchange Act pursuant to Rule 12g3-2(b)(1)s exemption for certain foreign securities); Technology Transfer, Incorporated (avail. March 16, 1992) (distributing company was a private company with approximately 30 shareholders). Because both Signet and Capital One are reporting companies and are current with respect to their respective reporting obligations, the proposed spinoff of Capital One can readily be distinguished from each of the no-action letters cited in this paragraph.

We respectfully submit that no specific form of information statement or other disclosure document should be required to be furnished in connection with the Spinoff because of the availability of information about Signet and Capital One in the financial markets. Signet has filed, and Signet and Capital One are expected in the future to file, timely reports under the Exchange Act. Information therefore is and will be readily available to the investing public about both Signet and Capital One. Moreover, we note that the 25-day prospectus delivery requirement of Rule 174(d) with respect to the Capital One Common Stock sold in the IPO terminated December 10, 1994. Since that date, no person who purchased Capital One common stock was entitled to receive any disclosure document. The same policy considerations that underlie Rule 174(d) and the Commissions integrated disclosure framework lead to the conclusion that no specific form of information statements if required in connection with the Distribution. ¹ Indeed, it would seem particularly anomalous to require Signet in effecting the Spinoff to incur the very significant expense of printing and mailing to its shareholders over 13,000 copies of a disclosure document which, if roughly equivalent to the IPO prospectus, would be over 100 pages in length when, unlike contemporaneous secondary trades for which no disclosure document would be required, the Spinoff would not even involve an investment decision.

We respectfully submit that no specific form of information statement or other disclosure document ² should be required to be furnished in connection with the Spinoff because of the widespread availability of information about Signet and Capital One in the financial markets. Both Signet and Capital One are subject to the filing requirements under the Exchange Act. Current information is readily available to the investing public about both Signet and Capital One, as reflected in Signets 1993 annual report to shareholders and 1993 Form 10-K and in the Prospectus. In addition, on January 24, 1995, Signet and Capital One each publicly released a summary of earnings for the year ended December 31, 1994. The Form S-1, together with the information statement and summaries of 1994 earnings for Signet and Capital One which will be transmitted with such statement, contain substantially the same information that would be required to be set forth in a Form 10 registration statement under the Exchange Act or a Form S-1 registration statement under the Securities Act if such a registration statement were required to be filed in connection with the Spinoff.

Based on the foregoing, we ask that the staff concur in our opinion that the Spinoff can be accomplished as contemplated above without registration under Section 5 of the Securities Act. If the staff is unable to concur, we request that the staff conclude that it will not recommend any enforcement action to the Commission if the Spinoff is made as outlined above without registration under the Securities Act.

B. Rule 144

Rule 144(a)(3) defines "restricted securities" as securities acquired from the issuer in a transaction or series of transactions not involving a public offering. In our opinion, the shares of Capital One Common Stock proposed to be distributed pursuant to the Spinoff would not be restricted securities as defined in Rule 144(a)(3) under the Securities Act because such securities would be distributed to all Signet common shareholders, and thus would in effect be issued to the public. To impose the holding period and other requirements of Rule 144 on Signet shareholders with respect to the shares of Capital One Common Stock received by them in the Spinoff would not serve any of the purposes underlying the Securities Act. As the Preliminary Note to Rule 144 indicates, "the rule is designed to prohibit the creation of public markets in securities of issuers concerning which adequate current information is not available to the public."

In connection with similar proposed distributions, the staff reached the conclusion that the distributed securities did not constitute "restricted securities." See, e.g., Sears, Ethyl, First Mississippi; Quantech Electronics Corp. (avail. October 4, 1989); Regency Electronics, Inc. (avail. January 31, 1989); REFAC Technology Development Corporation (avail. April 15, 1988); BSN; Medicore; Standard Shares. As noted above, current information with respect to both Signet and Capital One will be available to the public. Under these circumstances, the Capital One Common Stock distributed to Signet shareholders should not be deemed to be "restricted securities," and non-affiliates of Capital One should be able to sell the shares they receive in the Spinoff without complying with Rule 144. Affiliates of Capital One who desire to sell the Capital One Common Stock they received in the Spinoff should do so either pursuant to a registration statement under the Securities Act or pursuant to Rule 144 (except for the holding period requirement) or some other applicable exemption. We ask that the staff concur.

C. Sales of Fractional Shares.

Signet does not intend to issue fractional shares to its shareholders in the proposed distribution. To the extent fractional shares are involved in the Spinoff, Signet intends to retain an independent agent (the "Fractional Share Agent") to aggregate and sell shares of Capital One Common Stock for the account of Signet shareholders who would otherwise have received fractional shares in the Spinoff. The Fractional Share Agent would receive the proceeds from such sales and forward them to Mellon Bank, N.A. ("Mellon Bank"), which Signet intends to retain as distribution agent in connection with the Spinoff. Mellon Bank is not an affiliate of Signet or Capital One. As the distribution agent, Mellon Bank would perform the following ministerial functions: (i) compute the number of whole and fractional shares of Capital One Common Stock to which each Signet common shareholder of record is entitled by multiplying the number of shares owned by such holder by the Spinoff ratio and (ii) distribute to such holder on behalf of Signet both (x) stock certificates ³ for the number of whole shares to which such holder is entitled and (y) a check representing the cash proceeds of such holders fractional share as sold by the Fractional Share Agent.

We believe that these ministerial functions of Mellon Bank would not affect the independence of the Fractional Share Agent, as Mellon Bank would not have any responsibility for, or control over, the timing, method or terms of sales of the fractional shares as these would be the sole responsibility of the Fractional Share Agent. None of Signet, Capital One of Mellon Bank would have any control over the sales by the Fractional Share Agent, nor would any proceeds of the sales benefit in any way Signet, Capital One or Mellon Bank. The Fractional Share Agent would effect the necessary sales on behalf of Signet shareholders in such manner and at such times as such Agent deems appropriate through broker-dealers selected by the Fractional Share Agent (which broker-dealers would not be affiliates of either Signet, Capital One or Mellon Bank).

In our opinion, the sales by the Fractional Share Agent of shares representing fractional shares do not require registration under the Securities Act because the agents sales will constitute transactions by a person other than an issuer, underwriter, or dealer and, accordingly, would be exempt transactions under Section 4(1) of the Securities Act.

Securities Act Rule 152a provides:

Any offer or sale of a security, evidenced by a . . . document which represents a fractional interest in a share of stock or similar security shall be deemed a transaction by a person other than an issuer, underwriter or dealer, within the meaning of Section 4(1) of the Act, if the fractional interest (a) resulted form a stock dividend . . ., and (b) is offered or sold pursuant to arrangements for the purchase and sale of fractional interests among the persons entitled to such fractional interests for the purpose of combining such interests into whole shares, and for the sale of such number of whole shares as may be necessary to compensate security holders for any remaining fractional interests not so combined, notwithstanding that the issuer or an affiliate of the issuer may act on behalf of or as agent for the security-holders in effecting such transactions.

In our opinion, the proposed transactions will also satisfy the requirements of Rule 152a. Any fractional share interests resulting from the Spinoff will be represented by a certificate or certificates delivered to the agent. The fractional share interests will be the result of the tax-free dividend of Capital One Common Stock. As described above, the whole shares to be sole upon aggregation of the fractional share interests will be sold pursuant to arrangements of the type contemplated by in Rule 152a.

The staff has taken "no-action" positions in many "no-action" letters issued in connection with fractional shares sales incident to transactions similar to the Spinoff. Several of these letters cite the exemption provided by Rule 152a. See, e.g., Quaker Oats. In other cases, the staff has reached the same result on the basis of counsels interpretation of Section 4(1) without citing Rule 152a. See, e.g., Ethyl; Johnson Controls.

Based on the foregoing, it is our opinion that the sale of Capital One Common Stock by the Fractional Share Agent to effect cash payments for fractional shares will not constitute transactions by or for the issuer, and therefore, will constitute transactions by a person other than an issuer, underwriter or dealer. We request that the staff concur in our opinion that such sales are exempt transactions under Section 4(1) of the Securities Act, and, accordingly, that the shares involved are exempt from registration. Alternatively, we request that the staff confirm that it will not recommend that the commission take enforcement action if the Fractional Share Agent sells shares to provide cash for payment in lieu of fractional shares.

* * * *

The staffs assistance in acting as promptly as possible on the requests in this letter would be greatly appreciated. In the event that the staff is not inclined to grant any particular portion of the requested relief, we request the opportunity to discuss the matter with the staff prior to any final determination. If you need additional information, please contact me at (804) 775-4307 or, in my absence, R. Marshall Merriman, Jr. of this office at (804) 775-4380. In accordance with Release No. 33-6269, seven additional copies of this letter are enclosed.

Very truly yours,

McGUIRE, WOODS, BATTLE & BOOTHE L.L.P.

Joseph C. Carter, III

STAFF REPLY LETTER

February 14, 1995

RESPONSE OF THE OFFICE OF CHIEF COUNSEL

DIVISION OF CORPORATION FINANCE

Re: Signet Banking Corporation ("Signet")

Incoming letter dated February 9, 1995

Based upon the facts presented, the Division will not recommend enforcement action to the Commission if the shares of common stock of Capital One Financial Corporation ("Capital One") are distributed to Signets shareholders in a Spinoff as described in your letter without registration under the Securities Act of 1933 (the "Securities Act"). In reaching this position, we note that: (1) both Signet and Capital One are reporting companies under the Securities Exchange Act of 1934 (the "Exchange Act") and are current in their reporting obligations, (ii) the short-form information statement being distributed to shareholders in connection with the Spinoff will state that any person desiring a copy of the prospectus contained in the Form S-1 that was filed in connection with the IPO of Capital One may obtain a copy free of charge by contacting Signet, and (iii) the Form S-1, together with the short-form information statement and summaries of 1994 earnings for Signet and Capital One which will be delivered with such statement, contain substantially the same information as would be required to be set forth in a Form 10 registration statement under the Exchange Act or a Form S-1 registration statement under the Securities Act if such a registration statement were required to be filed in connection with the Spinoff.

The Division also is of the view that the Capital One common stock received by Signets shareholders in the distribution would not be "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act. Sales by Capital Ones affiliates, however, would be subject to Rule 144, except for the holding period requirement, absent registration or another appropriate exemption.

The Division, while not necessarily agreeing with your analysis in this regard, will not recommend enforcement action to the Commission if an independent agent sells shares of Capital One common stock without registration under the Securities Act in the manner described to provide cash in lieu of fractional shares.

Because these positions are based on the representations made to the Division in your letter, it should be noted that any different facts or conditions might require different conclusions. Moreover, the responses regarding registration under the Securities Act only express the Divisions positions on enforcement action and do not purport to express any legal conclusions on the questions presented.

Sincerely,

Laura Badian

Attorney Fellow

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