SEC Division of Trading and Markets no-action letter: Banco Santander, S.A. — SEC — US

DIVISION OF
TRADING AND MARKETS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
August 18,2008
Nicholas A. Kronfeld
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Re: Banco Santander, S.A.
File No. TP 08-77
Dear Mr. Kronfeld:
In your letter dated August 18, 2008, as supplemented by conversations with the staff, you request on behalfofBanco Santander, S.A., a bank organized under the laws of the Kingdom ofSpain ("Santander"), an exemption from Rules 101 and 102 of Regulation M under the Securities Exchange Act of 1934 (''Exchange Act") in connection with Santander's acquisition ("Acquisition") ofAlliance & Leicester pIc ("A&L''), a bank organized under the laws ofEngland and Wales. You seek an exemption to permit Santander' and its affiliates to conduct specified transactions outside the United States in Santander Shares during the distribution of Santander Shares to'the shareholders ofA&L.' Specifically, you request that: (i) the Market Making Subsidiary be permitted to continue to engage in market making activities as described in your letter; (ii) the Derivatives Market Maker be permitted to continue to engage in derivatives market-making and hedging activities as described in your letter; (iii) the Asset Managers be permitted to continue to engage in asset management activities as described in your letter; (iv) the Insurance Company be permitted to continue to engage in insurance activities as described in yow letter; and (v) the Non-U.S. Brokerage Units be permitted to continue to engage in unsolicited brokerage activities as descnbed in your letter. You also seek an exemption to permit certain Santander affiliates to conduct specified transactions in the United States in Santander Shares during the distribution of Santander Shares to the shareholders ofA&L. Specifically, you request that: (i) the Puerto Rico Asset Manager be permitted to continue to conduct asset management activities in Puerto Rico as described in your letter; (ii) Banco Santander International be permitted to continue to conduct asset planagement activities :fro~ the Continental United . States for non-U.S. clients as described in your letter; and (iii) the U.S. Brokerage Units be permitted to continue to engage in unsolicited brokerage activities as described in your letter. We have attached a copy ofyour correspondence to avoid reciting the facts set

Nicholas A. Kronfeld
August 18,2008 forth therein. Unless otherwise noted, each defined tenn in our response has the same meaning as defined in your letter. Response:
. Based on the facts and representations that you have made in your letter, but without necessarily concurring with your analysis, the Commission hereby grants Santander an exemption from Rules 101 and 102 ofRegulation M to permit the Market Making Subsidiary, Derivatives Market Maker, the Asset Managers including the Puerto Rico Asset Manager and Banco Santander International, the Insurance Company, and the Brokerage Units including the U.S. Brokerage Units (collectively, the "Companies") to continue to engage in the transactions described in your letter. In particular, in your correspondence you make the following key representations:

The average daily trading volume ("ADTV") ofSantander Shares in Spain during
the six months that ended on June 30, 2008 was 94.1 million shares valued at approximately€1.189billion ($1.872 billion);
Santander's market capitalization as ofJune 30, 2008 was approximately €72.99
billion ($106.58 billion), making it Spain's second largest company by capitalization and representing 17.65% ofthe ffiEX 35 index;
As ofJune 30, 2008, over 6 billion shares ofSantander Shares were outstan~g
that were held by over 2 million record holders with a public float value in excess of$1 00 billion;
The principal trading market for Santander Shares is on the Spanish Exchanges
through the AQS accounting for approximately 95% ofthe global ADTV value during the six months that ended on June 30, 2008;
The number ofSantander Shares to be delivered to A&L shareholders in the
Acquisition will represent approximately 2.2% ofthe Santander Shares outstanding upon consummation ofthe Acquisition;
Santander maintains and enforces written infonnation barrier policies and
procedures to prevent material non-public infonnation from passing between the sales/trading areas and other sensitive areas ofSantander including the investment oversight committee;
The Market Making Subsidiary conducts its market making activities outside the
United States and, during the six months that ended on June 30, 2008, the market making activities by the Market Making Subsidiary accounted for approximately 1.853% ofthe ADTV in Santander Shares on the Spanish Exchanges;

Nicholas A. Kronfeld
August 18, 2008

The Derivatives Market Maker conducts its derivatives market making and
hedging activities outside the United States and, during the six months that ended on June 30, 2008, the derivatives market making and hedging activities ofthe Derivatives Market Maker accounted for approximately 1.31% ofthe ADTV in Santander Shares on the Spanish Exchanges;
All ofthe Asset Managers except for the Puerto Rico Asset Manager and Banco
Santander International conduct their investment management activities outside the United States;
The Puerto Rico Asset Manager will only engage in nOlll1al course asset
management activities in Puerto Rico and the Puerto Rico Asset Manager's volume oftrading in Santander Shares has historically been low;
Banco Santander International will only engage in nOlll1al course asset
management activities with non-U.S. clients;
The Insurance'Company sells insurance products and conducts activities in
connection with investment selections made by purchasers ofsuch insurance products outside the United States;
Each ofthe Non-US. Brokerage Units conducts its unsolicited brokerage
activities outside the United States and, during the six months that ended 'on June 30,2008, the unsolicited brokerage activities ofthe Non-US. Brokerage Units accounted for approximately 10.79% ofthe ADTV in Santander Shares on the Spanish Exchanges;
Each ofthe US. Brokerage Units have been instructed to not make any
investment recommendations to their customers with respect to Santander Shares or ADSs during the restricted period and will only engage in nOlll1al caurse . unsolicited brokerage activities, which represents approximately 0.11% afthe worldwide ADTV in Santander Shares during the six months that ended on June 30,2008;
The withdrawal of a significant market maker in Santander Shares in the primary
market far those shares for an extended period oftime would have harmful effects in the home market and, indirectly, in the U.S. market, for Santander Shares, including a significant imbalance ofbuy and sell orders, which could cause greater valatility and reduced liquidity;
Each ofthe Market Maker Subsidiary, Derivatives Market Maker, the Asset
Managers, the Insurance Company, and the Brokerage Units has confinned that

! .
Nicholas A. Kronfeld
August 18, 2008 the activities for which it is requesting reliefwill be conducted in the ordinary course ofits businesses and in accordance with applicable English, Spanish, and other non-U.S. laws;

In the United States, Santander conducts a securities business through Santander
Securities Corporation, Santander Investment Securities, Banesto Securities, and ANSI, each a separate subsidiary that is registered with the Commission as a broker-dealer and is a member ofFINRA, and Santander Investment Securities and ANSI are also members ofthe NYSE; and
Santander Securities Corporation, Santander Investment Securities, Banesto
Securities, and ANSI will not engage in derivatives market marking and hedging, asset management and insurance, but rather will only engage in unsolicited brokerage activities in the nOlmal course ofits business with its customers. The exemption is subject to the following conditions:
1.. None ofthe transactions ofthe Companies described in your letter shall occur in the United States, with the exception ofthe unsolicited brokerage ofthe U.S. Brokerage Units, the Puerto Rican client asset management activities ofthe Puerto Rico Asset Manager and non-U.S. client asset management activities of Banco Santander International described in your letter;

All ofthe transactions described in your letter shall be effected in the ordinary
course ofbusiness and not for the purpose offacilitating the Acquisition;
The Acquisition documents distributed to U.S. holders will disclose the possibility
of, or the intention to make, the transactions described in you letter;
Santander and each ofthe Companies will provide to the Division ofTrading and
Markets (''Division''), upon request, a time-sequenced schedule ofall such transactions made during the Restricted Period. Such schedule will include:
(a) size, broker (ifany), time of execution, and price ofthe transactions; (b) the exchange, quotation system, or other facility through which the transactions occurred, and . (c) whether the transactions were made for a customer account or a proprietary account;
Upon requ~t ofthe Division, Santan,der and each ofthe Compl;lnies will transmit
the information requested in item 4 (above) to the Division at its offices in Washington, D.C. within 30 days ofits request;

Nicholas A. Kronfeld
August 18, 2008
6. Santander and each ofthe Companies shall retain all documents and other
information required to be maintained pursuant to this exemption for at least two years following the completion ofthe Acquisition;
7. Representatives ofSantander and each ofthe Companies shall be made available
(in person at the offices ofthe Commission in Washington, D.C. or by telephone) to respond to inquiries ofthe Division relating to their records; and
8. Except as otherwise exempted by this letter, Santander and each ofthe Companies
will comply with Regulation M.
The foregoing exemption from Rules 101 and 102 ofRegulation M is based solely on your representations and the facts presented to the staff and is strictly limited to the application ofthis rule to the proposed transactions. Such transactions should be discontinued, pending presentation ofthe facts for our consideration, in the event that any material change occurs with respect to any ofthose facts or representations. In addition, your attention is directed to the anti-fraud and anti-manipulation provisions ofthe Exchange Act, including Sections 9(a) and 10(b), and Rule 10b-5 thereunder. Responsibility for compliance with these and any other applicable provisions ofthe federal securities laws must rest with the participants in the various transactions. The Division expresses no view with respect to any other questions that the proposed transactions may raise, including, but not limited to, the adequacy ofdisclosure concerning, and the applicability of any other federal or state laws to, the proposed transactions. For the Commission, by the Division ofTrading and Markets, pursuant to delegated authority, James A. Brigagliano Associate Director Attachment

NICHOLAS ADAMS KRONFELD
2124504950
NICHOL.AS. KRONrELO@OPW.COM
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NY 100 17
2 I 2 450 4000
FAX 2 I 24503800
MENLO PARK
WASHINGTON. D.C.
LONDON
PARIS
FRANKF'URT
MADRID
TOKYO
BEIJING
HONG KONG
August 18, 2008
Re: Banco Santander, S.A. Request for Exemptive Relief from Rules 101 and 102 of Regulation M James A. Brigagliano Associate Director Division ofTrading and Markets Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Dear Mr. Brigagliano:
We are writing as counsel to Banco Santander, S.A. ("Santander"), a bank organized under the laws ofthe Kingdom of Spain, with respect to the application ofRegulation M to transactions by Santander and its affiliates in the ordinary shares of Santander (the "Santander Shares") during the distribution of Santander Shares to be made by Santander to shareholders ofAlliance & Leicester pIc, a bank organized under the laws ofEngland and Wales ("A&L"), in connection with the proposed acquisition ofA&L by Santander (the "Acquisition"). Specifically, on behalfof Santander, we ask the members ofthe staff(the "Staff') ofthe Securities and Exchange Commission (the "SEC") to grant Santander exemptive relief from Rules 101 and 102 ofRegulation M to permit Santander and its affiliates to continue, in the ordinary course oftheir respective businesses as described below and in accordance with applicable local law, to engage in the activities described below during the distribution of Santander Shares in connection with the Acquisition. In connection with the relief requested by Santander in this letter, please note that substantially similar

James A. Brigagliano 2 August 18, 2008 exemptive relieffrom Rules 101 and 102 ofRegulation M was granted to Santander under your exemptive letter dated September 10, 2004. 1 Market Making Activities. As is customary in Spain for financial institutions, Santander engages in market making activities with respect to Santander Shares through a subsidiary dedicated to that function (the "Market Making Subsidiary,,).2 The Market Making Subsidiary makes bids and offers for Santander Shares on the Automated Quotation System (Sistema de Intercanexi6n Bursdtil Espana!) ofthe Spanish stock exchanges (the "AQS"), the centralized national market that integrates by computer quotation the Spanish stock exchanges in Madrid, Barcelona, Bilbao and Valencia (collectively, the "Spanish Exchanges") and purchases and sells Santander Shares on the AQS. The Market Making Subsidiary effects these transactions for its own account in order to provide liquidity to the market. Derivatives Market Making and Hedging. As part ofits business, the Treasury department of Santander and Wallcesa, S.A. (a subsidiary of Santander) that effects trades in derivatives on Santander Shares in connection with stock options issued by Santander (the "Derivatives Market Maker") issues, buys and sells derivatives on Santander Shares or on baskets or indices including Santander Shares (the "Santander Share Derivatives") for its own account and for the accounts ofits customers outside the United States. These derivatives include listed and over-the-counter options, warrants, futures, convertible securities and other structured products relating to Santander Shares or to baskets or indices including Santander Shares, as well as index futures on the foregoing. The Derivatives Market Maker engages in derivatives market making activities, on both solicited and unsolicited bases, in order to provide liquidity to the derivatives market and to facilitate customers' derivatives transactions. These transactions are effected primarily on the MEFF Renta Variable, S.A. (the "MEFF Renta Variable") with the balance occurring on other exchanges outside the United States and, in some cases, in the over-the-counter market outside the United States. In addition, the Derivatives Market Maker solicits and effects trades in Santander Shares or in derivatives, including listed and over-the-counter options, warrants, futures, convertible securities and other structured products relating to Santander Shares or baskets or indices including Santander Shares, as well as index futures on the foregoing, for its own account and for the accounts ofits customers for the purpose of hedging positions (or adjusting or liquidating existing hedge positions) belonging to it and its customers that are established in connection with these derivatives market making activities. The hedging transactions in Santander Shares are effected outside the United States through the AQS and the hedging transactions in derivatives on Santander
Shares are effected outside the United States on the MEFF Renta Variable, on other exchanges See Banco Santander Central Hispano, S.A., SEC No-Action Letter, File No. TP 04-70 (Sep. 10,2004). Santander's market making activities are carried out by Pereda Gestion, SA., a corporation organized under the laws of Spain.

James A. Brigagliano 3 August 18, 2008 outside the United States and in the over-the-counter market outside the United States. During the twelve months ended December 31, 2007 and the six months ended June 30, 2008 these market making and hedging transactions in Santander Shares and derivatives on Santander Shares amounted to approximately 3.99% and 1.31%, respectively, ofthe value of average daily trading volume (the "ADTV") in Santander Shares on the Spanish Exchanges. Trading in Santander Shares by the Asset Managers. Certain affiliates of Santander manage the assets ofmutual funds, pension funds and discretionary investor portfolios (such affiliates, the "Asset Managers"; such funds and discretionary investor portfolios, the "Managed Funds,,).3 As part oftheir ordinary investment management activities on behalf ofthe Managed Funds, the Asset Managers buy and sell Santander Shares and derivatives, including listed and over-the-counter options, warrants, convertible securities and other structured products relating to Santander Shares or baskets or indices including Santander Shares, as well as index futures on the foregoing, for the Managed Funds' accounts. Trading by the Insurance Company. As part ofits ordinary business, Santander Seguros y Reaseguros, S.A., an affiliate of Santander incorporated in Spain (the "Insurance Company"), sells certain insurance products requiring the insurer to invest the premiums paid by the purchaser ofthe policies within certain asset classes determined by that purchaser (such as shares represented in the IBEX 35 Index, which includes Santander Shares) (such products, the "Asset The Asset Managers consist of Banif Gestion, S.A., S.G.I.I.C., Banesto Banca Privada Gestion, S.A., S.G.I.I.C., Optimal Alternative Investment, S.A., S.G.I.I.C., Santander Carteras, S.G.C., S.A., Santander Asset Management, S.A., S.G.I.I.C. and Santander Pensiones, S.A., E.G.F.P., each a corporation organized under the laws of Spain (collectively, the "Spanish Asset Managers"), Santander Rio Asset Management Gerente de Fondos Comunes de Inversion SA., a corporation organized under the laws of Argentina, Santander Asset Management DTVM, Ltda., a corporation organized under the laws of Brazil, Santander Asset Management, S.A., Administradora General de Fondos, a corporation organized under the laws ofChile, Santander Investment Trust Colombia S.A., Sociedad Fiduciaria, a corporation organized under the laws ofColombia, Santander Asset Management Ireland, Ltd., a corporation organized under the laws ofIreland, Santander Private Banking, SpA, a corporation organized under the laws ofItaly, Santander Asset Management Luxembourg, S.A., a corporation organized under the laws of Luxembourg, Gestion Santander, S.A. de C.V., Sociedad Operadora de Sociedades de Inversion, Grupo Financiero Santander, each a corporation organized under the laws of Mexico, Santander Asset Management - Sociedade Gestora de Fundos de Investimento Mobiliario, S.A. and
Santander Pensoes - Sociedade Gestora de Fundos de Pensoes, S.A., each a corporation organized under the laws of Portugal, Santander Asset Management Corporation, a corporation organized under the laws of Puerto Rico (the "Puerto Rico Asset Manager"), Banco Santander (Suisse), S.A. and Optimal Investment Services, S.A., each a corporation organized under the laws of Switzerland, Santander Asset Management UK Holding Ltd., Santander Asset Management UK Limited, Abbey National PEP & ISA Managers Limited" Santander Unit Trust Managers UK Limited, and Santander Portfolio Management UK Limited, each a corporation organized under the laws ofthe United Kingdom, and Banco Santander International, a banking corporation organized under U.S. laws ("Banco Santander International").

James A. Brigagliano 4 August 18, 2008
Class Policies"). The Insurance Company does not provide any investment advice to purchasers with respect to the asset classes that may be selected by the customer as part of the Asset Class Policies. Unsolicited Brokerage. The Non-U.S. Brokerage Units4 effect unsolicited brokerage transactions in Santander Shares by placing orders on the AQS and other overseas exchanges or effecting trades in the over-the-counter markets in Spain and elsewhere outside the United States. These transactions arise from unsolicited buy or sell orders received by the Non-U.S. Brokerage Units from their customers, although the Non-U.S. Brokerage Units may solicit the other side ofthese transactions. Additionally, Santander conducts a securities business through its affiliated U.S. (including Puerto Rico) broker-dealers, Santander Securities Corporation, a corporation incorporated under the laws of Puerto Rico ("Santander Securities Corporation"), Santander Investment Securities, Inc., a corporation incorporated under the laws ofthe state of Delaware ("Santander Investment Securities"), Banesto Securities, Inc., a corporation incorporated under the laws ofthe state of Delaware ("Banesto Securities"), and Abbey National Securities Inc., a corporation incorporated under the laws ofthe state of Delaware ("ANSI" and, together with Santander Securities Corporation, Santander Investment Securities and Banesto Securities, the "U.S. Brokerage Units"; the U.S. Brokerage Units, together with the Non-U.S. Brokerage Units, the "Brokerage Units"), each of which may engage in unsolicited brokerage transactions in the Santander Shares and Santander American Depositary Shares (the "Santander ADSs") with its customers in the United States. These transactions would be effected in the United States markets or in the non-U.S. markets described above. During the twelve months ended December 31, 2007 and the six months ended June 30, 2008, the unsolicited brokerage activities of the Brokerage Units (excluding trades executed by the Non-U.S. Brokerage Units on behalf ofthe Market Making Subsidiary) as a percentage ofthe worldwide value ofADTV in Santander Shares was 12.91% and 10.36%, respectively. During the twelve months ended December 31, 2007 and the six months ended The Non-U.S. Brokerage Units consist of Santander Investment Bolsa, S.V., S.A. and Banesto Bolsa, S.A., Sociedad de Valores y Bolsa, each a corporation organized under the laws of Spain (together, the "Spanish Brokerage Units"), Santander Sociedad de Bolsa, S.A., a corporation organized under the laws of Argentina, Santander Investment Limited, a corporation organized under the laws of Bahamas, Banespa, S.A. Corretora de Cambio e Titulos, Santander Brasil S.A., Corretora de Cambio e Valores Mobiliarios, Santander Distribuidora de Titulos e Valores Mobiliarios Ltda. and Norchem Participayoes.e Consultoria, S.A., each a corporation organized under the laws of Brazil, Santander Investment Valores Colombia, S.A., Comisionista de
Bolsa Comercial, each a corporation organized under the laws of Colombia, Santander Investment, S.A. Corredores de Bolsa and Santander, S.A. Agente de Valores, each a corporation organized under the laws ofChile, Casa de Bolsa Santander, S.A. de C.V., Grupo Financiero Santander and Efectividad en Medios de Pago, S.A. de C.V., each a corporation organized under the laws of Mexico, Marylebone Road CBO 3, BV, a corporation organized under the laws of The Netherlands, Banco Santander de Negocios Portugal, S.A., a corporation organized under the laws of Portugal, Abbey Stockbrokers Limited, a corporation organized under the laws ofthe United Kingdom, and Valores Santander Casa de Bolsa, c.A., a corporation organized under the laws of Venezuela.

James A. Brigagliano 5 August 18, 2008
June 30, 2008, the unsolicited brokerage activities ofthe U.S. Brokerage Units collectively as a percentage ofthe worldwide value of ADTV in Santander Shares was 0.07% and 0.11%, respectively. The Market Making Subsidiary, the Derivatives Market Maker, the Spanish Asset Managers, the Insurance Company and the Spanish Brokerage Units are collectively referred to herein as the "Spanish Companies". The Spanish Companies, together with the other Asset Managers and the other Brokerage Units are collectively referred to herein as the "Companies". The availability ofthe exemptions Santander is requesting would be conditioned on the disclosure and record-keeping undertakings outlined below. The descriptions offactual matters in this letter, including the market for Santander Shares and the Companies' business and market activities, as well as the descriptions of certain matters under Spanish law and the laws ofother jurisdictions outside the United States included in this letter, have been provided to us by Santander.
I. The Market for Santander Shares
The principal trading market for Santander Shares is on the Spanish Exchanges through the AQS in Spain. The Santander Shares also are listed on the New York (in the form ofthe Santander ADSs); Milan, Lisbon, Buenos Aires, London and Mexico Stock Exchanges. Each Santander ADS represents one Santander Share and is evidenced by an American Depositary Receipt issued by JPMorgan Chase Bank, as Depositary. Santander is a foreign private issuer as defined in Rule 3b-4(c) under the U.S. Securities Exchange Act of 1934. As of December 31, 2007,6,254,296,579 Santander Shares were outstanding, held by 2,278,321 record holders. Approximately 62.38% ofthe outstanding Santander Shares were held ofrecord by non-residents of Spain and 14.37% ofthe outstanding Santander Shares were held by 796 record holders with registered addresses in the United States (including Puerto Rico). As ofJune 30, 2008, 6,254,296,579 Santander Shares were outstanding, held by 2,255,266 record holders. Approximately 62.77% ofthe outstanding Santander Shares were held ofrecord by non-residents of Spain and 14.37% of the outstanding Santander Shares were held by 814 record holders with registered addresses in the United States (including Puerto Rico). Santander's market capitalization at June 30, 2008 was approximately €72.99billion ($114.94 billion),5 the largest of any Spanish bank and the second Throughout this letter, euros have been translated to dollars at the rate ofEI .00 = $1.4603, the noon buying rate in New York City published by the Federal Reserve Bank ofNew York on December 3 1,2007, with regard to data as of or for periods ended December 31,2007, and at the rate of at the rate of€1.00= $1.5748, the noon buying rate in New York City published by

James A. Brigagliano 6 August 18, 2008 largest of any Spanish company, representing 17.65% ofthe IBEX 35 Index. The values of ADTV in the Santander Shares on the Spanish Exchanges during the twelve months ended December 31, 2007 and the six months ended June 30, 2008 were approximately £1,190.63 million ($1,738.68 million) and €1,188.69million ($1,871.95 million), or 97.8% and 95.0% ofthe global value ofADTV, respectively. The ADTV in number ofshares in the Santander Shares on the Spanish Exchanges during the twelve months ended December 31, 2007 and the six months ended June 30, 2008 were approximately 85.4 million shares and 94.1 million shares, respectively. The values ofADTV ofthe ADSs on the New York Stock Exchange (the "NYSE") during the twelve months ended December 31, 2007 and the six months ended June 30, 2008 were approximately $11.66 million and $21.84 million, respectively. The values of ADTV ofthe Santander Shares on the Milan, Lisbon, Buenos Aires, London and Mexico Stock Exchanges during the twelve months ended December 31,2007 and the six months ended June 30, 2008 were, in the aggregate, approximately €18.01 million ($26.30 million) and €48.22million ($75.94 million), respectively. The AQS links the Spanish Exchanges, providing securities listed on it with a uniform continuous market that eliminates the differences among the Spanish Exchanges. The principal feature ofthe system is the computerized matching of buy and sell orders at the time of entry ofthe order. Each order is executed as soon as a matching order is entered, but can be modified or canceled until executed. The activity ofthe market can be continuously monitored by investors and brokers. All trades on the AQS must be placed through a bank, a brokerage firm, an official stock broker or a dealer firm member of a Spanish Exchange directly. The AQS operates separate order-matching systems for block trades (which exceed certain minimum amounts) and all other trades. During the twelve months ended December 31, 2007 and the six months ended June 30, 2008, the aggregate turnover on the Spanish Exchanges, for both equity and debt securities, was in excess of€5,891 billion and €3,399billion, respectively, and as of December 31, 2007 and June 30, 2008, the overall market capitalization of equity securities listed on the Spanish Exchanges was approximately €1,384.7 billion and €1,259.0 billion, respectively. As of December 31,2007 and June 30, 2008, there were 3,537 and 3,615 listed companies on the Spanish Exchanges, respectively.
II. Santander's Market Activities
Santander is one ofthe world's largest banking and financial services groups, and its headquarters are in Madrid, Spain. In addition, Santander has subsidiary, branch, representative and similar offices worldwide. Santander is regulated and licensed under the Bank of Spain in Spain, and its branches and affiliates in the United States are subject to applicable U.S. bank regulations, the Federal Reserve Bank ofNew York on June 30, 2008, with regard to data as of or for periods ended June 30, 2008.

James A. Brigagliano 7 August 18, 2008 among other laws and regulations. Santander has confirmed that the activities described below, for which it is requesting relief, are permitted under and would be conducted in accordance with applicable Spanish law and other non-U.S. laws. Assuming the requested reliefis granted, Santander has confirmed that the activities described below also would be conducted in accordance with applicable U.S. law. In the continental United States, Santander conducts a securities business through Santander Investment Securities, Banesto Securities and ANSI and an asset management business for non-U.S. clients through Banco Santander International. During the twelve-month period ofAugust 1,2007 through July 30, 2008, purchases and sales by Banco Santander International of Santander Shares and ADSs totaled approximately $1.39 million. Santander Investment Securities and ANSI are registered with the SEC as broker-dealers and are members ofthe Financial Industry Regulatory Association ("FINRA") and the NYSE. Banesto Securities is registered with the SEC as a broker-dealer and is a member of FINRA. In Puerto Rico, Santander conducts a securities business through Santander Securities Corporation and an asset management business through the Puerto Rico Asset Manager. During the period from June 1, 2007 through July 30, 2008, purchases and sales by the Puerto Rico Asset Manager of Santander Shares and ADSs totaled approximately $196 thousand. Santander Securities Corporation is registered with the SEC as a broker-dealer and is a member of FINRA. With respect to those activities for which Santander is seeking relief, Santander Investment Securities, Banesto Securities and ANSI will only engage in unsolicited brokerage activities in the United States, Santander Securities Corporation will only engage in unsolicited brokerage activities in Puerto Rico, the Puerto Rico Asset Manager will only engage in asset management activities in Puerto Rico and Banco Santander International will only engage in asset management activities from the continental United States for nonU.S. clients. The rest ofthe activities for which Santander is seeking relief (including unsolicited brokerage and asset management), with the possible exception oftrades made by the Spanish Asset Managers, which, due to their fiduciary obligations as asset managers, cannot follow instructions from Santander, or by the Asset Managers not based in Spain, which may not be able to follow the instructions to be provided by Santander due to the same fiduciary duties, will be conducted by the Spanish Companies and the other Companies outside the United States and Puerto Rico as described below. Market Making Activities. As is customary in Spain for financial institutions, Santander engages in market making activities with respect to Santander Shares through its Market Making Subsidiary. The Market Making Subsidiary makes bids and offers for Santander Shares and purchases and
sells Santander Shares on the AQS. The Market Making Subsidiary effects these transactions for its own account in order to provide liquidity to the market. The Market Making Subsidiary conducts its market making activities outside the United States and manages these activities from Madrid.

James A. Brigagliano 8 August 18, 2008
As noted above, the AQS is an order-matching system, not an inter-dealer market with formal, officially designated market makers. The Market Making Subsidiary engages in its market making activities by placing bids and offers on the AQS, primarily through one ofthe Non-U.S. Brokerage Units. However, the Market Making Subsidiary is not required to and does not maintain independently established bid and ask prices. In connection with block trades, if an adequate counterparty order is not available on the AQS at the time that the bid or offer is placed, the broker through which the order was placed, or the Market Making Subsidiary itself, may solicit counterparty orders. The Market Making Subsidiary is not required to make a market in the Santander Shares. Accordingly, the Market Making Subsidiary does not act as a "market maker" as that term is understood in the U.S. securities markets. Santander believes that the Market Making Subsidiary is the only market maker for Santander Shares on the Spanish Exchanges and, for the twelve months ended December 31, 2007 and the six months ended June 30, 2008, the Market Making Subsidiary's market making activities accounted for approximately 1.065% and 1.853% ofthe value of ADTV in Santander Shares on the Spanish Exchanges. At times when supply has significantly exceeded demand, its share of such value of ADTV has increased materially, but the Market Making Subsidiary's market making activities generally do not comprise in excess of20% ofthe value of ADTV in Santander Shares as measured on a daily basis, on the Spanish Exchanges. The monthly average percentage of outstanding Santander Shares held by the Marketing Making Subsidiary as a result ofmarket making activities ranged from 0.294% to 0.005% during the twelve months ended December 31, 2007 and ranged from 0.675% to 0.175% during the six months ended June 30, 2008. During the restricted period for the Acquisition (the "Restricted Period"), the Market Making Subsidiary intends to continue its market making activities in the ordinary course of business, although the Acquisition distribution may result in increased selling pressure and thus volumes oftransactions by the Market Making Subsidiary may be higher than average and represent a greater than average percentage oftrading volume, including in excess of20% ofsuch daily trading volume. Derivatives Market Making and Hedging. The Derivatives Market Maker conducts its derivatives market making and hedging activities outside the United States and manages these activities principally from Spain. In Spain, the Derivatives Market Maker is admitted under the MEFF Renta Variable rules as a market maker and is a significant market maker in derivatives of Santander Shares. The Derivatives Market Maker is also the only market maker on the Spanish Exchanges ofsecuritized derivatives issued by it and based, in whole or in part, on the Santander Shares and the Derivatives Market Maker i~ required by applicable stock
exchange rules to provide quotes for such derivatives it issues. This activity involves the issuance, purchase and sale of derivative products for its own account and for the accounts ofits customers, on both solicited and unsolicited bases, on the Spanish Exchanges, certain other non-U.S. exchanges

James A. Brigagliano 9 August 18, 2008 and in the over-the-counter market in Spain and elsewhere outside the United States. These derivatives products include listed and over-the-counter options, warrants, futures and other securities that are exercisable or convertible into, or the value of which is determined by reference to, Santander Shares or proprietary or third-party baskets or indices including Santander Shares. These derivatives may also include index futures on the foregoing and total return cash-settled equity swaps on Santander Shares in connection with stock options issued by Santander. The Derivatives Market Maker's derivatives market making involves issuing, purchasing and selling derivatives on Santander Shares in order to facilitate customer orders and to provide liquidity to the market. In addition, as a result ofits derivatives market making, the Derivatives Market Maker will maintain varying positions in these derivatives and its financial exposure to movements in the price ofthe Santander Shares will vary from time to time. In order to manage this financial exposure, the Derivatives Market Maker continually enters into hedging transactions that involve, in whole or in part, purchases and sales of Santander Shares or of derivatives based on Santander Shares, for its own account and on behalf ofits customers in order to assist them in hedging their own derivatives positions. The derivatives hedging transactions in Santander Shares described above occur primarily on the AQS and on the MEFF Renta Variable, with the balance occurring on other exchanges outside the United States and, in some cases, in the over-the-counter market outside the United States. During the twelve months ended December 31,2007 and the six months ended June 30, 2008, these market making and hedging transactions in Santander Shares represented approximately 3.99% and 1.31%, respectively, ofthe value ofADTV in Santander Shares on the Spanish Exchanges. Trading in Santander Shares by the Asset Managers. As part oftheir ordinary investment management activities, the Asset Managers buy and sell Santander Shares and derivatives, including listed and over-the-counter options, warrants, convertible securities and other structured products related to Santander Shares or baskets or indices including Santander Shares, as well as index futures on the foregoing, outside the United States for the Managed Funds' accounts.6 Under Spanish law, the Asset Managers have a fiduciary duty to oversee the Managed Funds in a manner that is in the best interests ofthe investors ofthose funds.7 The Asset Managers are prohibited by law from taking into account any 6 7 The Puerto Rico Asset Manager conducts such activities in Puerto Rico and Banco Santander International conducts such activities in the continental United States for non-U.S. clients. Both entities' volume oftrading in Santander Shares has historically been low. Under Spanish law, Santander cannot issue directives to the
Spanish Asset Managers requesting them to stop trading in any specific security for a specified period. This has been confinned orally by the Spanish National Markets Commission (the "CNMV"). As a result, prior to the commencement ofthe Restricted Period, Santander will instead issue advisory notices to the Spanish Asset Managers infonning them that any trading by them in Santander Shares or derivatives during the Restricted Period could result in a violation of U.S. law. Prior to the commencement ofthe Restricted Period, Santander will issue directives to the Asset Managers not based in Spain requesting such Asset Managers to stop trading in

James A. Brigagliano 10 August 18, 2008 factors other than the interests ofthe Managed Funds' beneficiaries in making investment decisions. Accordingly, the Asset Managers would be prohibited by law from following a directive by Santander to cease trading Santander Shares and derivatives, including listed and over-the-counter options, warrants, convertible securities and other structured products related to Santander Shares or baskets or indices including Santander Shares, as well as index futures on the foregoing, during the Restricted Period, unless the Asset Managers believed that cessation ofsuch trading was in the best interests ofthe Managed Fund's beneficiaries.s Similarly, the Asset Managers would be prohibited by law from following a Santander directive to bid for or purchase Santander Shares and derivatives, including listed and over-the-counter options, warrants, convertible securities and other structured products related to Santander Shares or baskets or indices including Santander Shares, as well as index futures on the foregoing, unless the Asset Managers independently concluded that such bids or purchases were in the best interests ofthe Managed Fund's beneficiaries. Trading by the Insurance Company. The Insurance Company purchases Santander Shares in connection with investing premiums paid on Asset Class Policies, which require investments within a narrow class of assets, such as the IBEX 35 Index, that may include Santander Shares. The Insurance Company conducts these activities outside the United States. Under Spanish law, the Insurance Company has a fiduciary duty to the purchasers ofAsset Class Policies to oversee the investments with respect to those policies in a manner that is in the best interests ofthose purchasers. The Insurance Company may not take into account any factors other than the interests of its insureds in making investment decisions under those policies. Accordingly, the Insurance Company would be prohibited by law from following, with respect to the Asset Class Policies, a directive by Santander to cease trading Santander Shares during the Restricted Period, unless such a halt in trading were in the best Santander Shares or derivatives until the termination ofthe Restricted Period. However, in light ofthe fiduciary duties that the Asset Managers have to the beneficiaries ofthe Managed Funds, no assurances can be given that the Asset Managers will in fact refrain from trading in Santander Shares or derivatives during the Restricted Period. Accordingly, we are asking that the requested relief cover the asset management activities ofthe Asset Managers to the extent that the Asset Managers continue to trade in Santander Shares or derivatives in the ordinary course of business during the Restricted Period. Some of the pension funds managed by the Asset Managers have an "investment oversight committee" charged with overseeing the investments made by the Asset Managers. In certain cases, representatives and/or
employees of Santander or its affiliates may be members of those investment oversight committees. However, those committees (and their members) would be unable to require the pension fund Asset Manager to stop or start trading Santander Shares or derivatives during the Restricted Period if the Asset Manager did not believe it was in the best interests ofthe fund's owners to do so. The representatives and/or employees of. Santander who participate on the investment oversight committees are, like the Asset Managers themselves, isolated by Chinese Walls from the areas of Santander where pricesensitive information relating to Santander Shares or derivatives and where information relating to the Acquisition would be discussed.

James A. Brigagliano 11 August 18,2008 interests ofthe purchasers ofthose policies. Similarly, the Insurance Company would be prohibited by law from following a Santander directive to bid for or purchase Santander Shares unless the Insurance Company independently concluded that such bids or purchases were in the best interests ofits insureds under the Asset Class Policies. Unsolicited Brokerage. The Non-U.S. Brokerage Units effect unsolicited brokerage transactions in the Santander Shares by placing orders on the Spanish Exchanges and other overseas exchanges or effecting trades in the over-thecounter market in Spain and elsewhere outside the United States, in each case on behalf of customers. These transactions arise from unsolicited buy and sell orders received from their customers, although the Non-U.S. Brokerage Units may solicit the other side ofthese transactions. The unsolicited brokerage activities of the Non-U.S. Brokerage Units (excluding trades executed by the Non-U.S. Brokerage Units on behalf ofthe Market Making Subsidiary) represented approximately 13.12% and 10.79% ofthe value of ADTV in Santander Shares on the Spanish Exchanges during the twelve months ended December 31, 2007 and the six months ended June 30, 2008, respectively. Although the Non-U.S. Brokerage Units from time to time provide advice to their customers regarding an investment in Santander Shares, none ofthe NonU.S. Brokerage Units, Santander or any subsidiary of Santander publishes research reports concerning Santander. Furthermore, the Non-U.S. Brokerage Units' personnel have been instructed not to make any investment recommendations to their customers with respect to Santander Shares or ADSs during the Restricted Period. As ofJune 30, 2008, 55.95% of Santander Shares were held by customers of Santander and its affiliates in securities accounts at Santander and its affiliates in Spain. The Non-U.S. Brokerage Units are required by Spanish law, as well as, in some cases, by the terms oftheir contracts with customers, to facilitate the trading activity of customers as described above.9 It would place a substantial burden on the Non-U.S. Brokerage Units' customers to require them to transfer their Santander Shares to a securities account with another bank, or to have the Non-U.S. Brokerage Units place orders with another bank, in order to make trades with respect to Santander Shares during the Restricted Period. Moreover, the Non-U.S. Brokerage Units would likely lose a significant number ofthose customers ifthe Non-U.S. Brokerage Units were prevented from providing them with customary facilitation services during the Restricted Period. As noted above, the U.S. Brokerage Units may also engage in unsolicited brokerage transactions in the Santander Shares with their customers in the United States. These transactions would be effected on the NYSE, in the over-thecounter markets in the United States or in the non-U.S. market~ described above. 9 The Brokerage Units are
not required, however, to buy or selI Santander Shares as principal for the benefit oftheir clients.

James A. Brigagliano 12 August 18, 2008
The personnel ofthe U.S. Brokerage Units have been instructed not to make any investment recommendations to their customers with respect to Santander Shares or ADSs during the Restricted Period. Significance to Market. As noted above, the Market Making Subsidiary's market making activities accounted for 1.065% and 1.853% ofthe values of ADTV in Santander Shares on the Spanish Exchanges during the twelve months ended December 31, 2007 and the six months ended June 30, 2008, respectively, while the derivatives market mals-ing and hedging activities ofthe Derivatives Market Maker and the unsolicited brokerage activities ofthe Non-U.S. Brokerage Units (excluding trades executed on behalf ofthe Market Making Subsidiary) represented approximately 3.99% and 13.12%, respectively, ofsuch 2007 value of ADTV and approximately 1.31% and 10.79%, respectively, ofsuch 2008 value of ADTV. In the aggregate, these market activities represented approximately 18.175% and 13.953% ofthe values of ADTV in Santander Shares on the Spanish Exchanges during the twelve months ended December 31, 2007 and the six months ended June 30, 2008, respectively, making Santander, on an aggregate basis, the largest market participant in the market for Santander Shares on the Spanish Exchanges and the only market maker in such shares. Although Santander is unable to determine on whose behalfthe non-Santander record holders of Santander Shares are trading such shares on the Spanish Exchanges, the second largest participant in the market for Santander Shares accounted for only approximately 8.69% and 12.60% ofthe values of ADTV in Santander Shares on the Spanish Exchanges during the twelve months ended December 31, 2007 and the six months ended June 30, 2008, respectively. Chinese Walls. Santander maintains and enforces written "Chinese Wall" policies and procedures to prevent material non-public information from passing between the sales/trading areas and other sensitive areas of Santander (including any investment oversight committee). Accordingly, during restricted periods prior to announcements of earnings results or other material developments that have not yet become public, all market making and other ordinary course market activities of Santander are permitted to continue. Under these policies and procedures, Santander's traders and sales force who conduct these market activities will generally be able to continue doing so during and outside these restricted periods, although senior management may restrict such activities in extraordinary circumstances. Santander will continue to maintain and enforce these policies and procedures during the Restricted Period. Other affiliates of Santander conduct market activities in Santander Shares in the ordinary course oftheir business. In connection with the Acquisition, these other affiliates will comply with Regulation M, either by suspending their market activities during the relevant period or by conducting those activities in accordance
with an available exception froIl) Regulation M. These exceptions might include those available for "affiliated purchasers." Accordingly, Santander is not seeking relief from the Stafffor these activities.
III. The Santander/A&L Acquisition

James A. Brigagliano 13 August 18, 2008
On July 14,2008, Santander and A&L announced the tenus of the Acquisition pursuant to which holders ofA&L common stock will, ifthe Acquisition is completed, receive one share of Santander common stock for every three shares of A&L common stock. The Acquisition will be effected by means of a Scheme of Arrangement under Part 26 ofthe Companies Act 2006 of England and Wales. Pursuant to the provisions of Part 26, Santander intends to deliver the Santander Shares in exchange for the cancellation of A&L's shares. In order for the Scheme of Arrangement to become effective and binding, the following steps must take place in sequence:

distribution of a proxy statement/explanatory document to all registered
shareholders1o of A&L which contains the background to, reasons for, and terms and conditions ofthe Acquisition as well as notices ofthe Court Meeting (as defined below) and Shareholders' Meeting (as defined below), which meetings are scheduled to occur approximately one month after the distribution ofsuch proxy statement/offering document;
approval ofthe Scheme ofArrangement by a majority in number ofthe
holders ofA&L's shares representing not less than 75% in value ofthe votes cast of holders ofsuch shares at a meeting (the "Court Meeting") convened at the direction ofthe High Court ofEngland and Wales (the "High Court");
approval of a special resolution required to implement the Scheme of
Arrangement through a capital reduction in A&L by holders of A&L's shares representing not less than 75% in value of votes cast of holders of such shares at an extraordinary general meeting ofshareholders convened by A&L (the "Shareholders' Meeting");
approval by Santander Shareholders at Santander's General Shareholders'
Meeting of an increase in Santander's share capital so that Santander may issue new Santander Shares pursuant to the Scheme of Arrangement;
the sanction ofthe Scheme of Arrangement by the High Court after a
hearing relating thereto and delivery ofsuch court order to the Registrar of Companies in England and Wales;
the confirmation ofthe capital reduction of A&L by the High Court after a
hearing related thereto; and
the registration ofthe court order approving the capital reduction ofA&L
with the Registrar of Companies in England and Wales.
\0 Shareholders in certain jurisdictions will not receive the proxy statement due to local securities law restrictions.

James A. Brigagliano 14 August 18, 2008
In order to sanction the Scheme of Arrangement, the High Court must consider, among other things, the fairness ofthe Scheme of Arrangement with regard to the interests of A&L's shareholders. In determining whether to sanction the Scheme of Arrangement, the Court may require additional evidence as to the fairness of the Scheme of Anangement and may entertain any objections brought by interested parties. Because ofthe various procedural steps which need to be completed in order for the Acquisition to be sanctioned as a Scheme of Arrangement (including the obtaining of necessary anti-trust and regulatory approvals and clearances in the United Kingdom, the satisfaction of certain closing conditions and the approval required by Santander's shareholders in order to effect a necessary capital increase), Santander estimates that the entire process could last up to two months after distribution ofthe proxy statement (and potentially longer in the event of a competing offer for A&L). The Santander Shares to be delivered pursuant to the Scheme of Arrangement will be issued to U.S. persons without registration under the Securities Act of 1933 pursuant to Section 3(a)(1O) thereof. The Santander Shares to be delivered to A&L's shareholders will represent approximately 2.2% ofthe Santander Shares outstanding upon consummation ofthe Acquisition. A&L's shares are listed on the London Stock Exchange and their principal market is in the United Kingdom. In addition, ADRs representing A&L's shares, issued under one unsponsored ADR program, are traded in the over-the-counter market in the United States; II Santander has been advised that such trading comprised approximately 0.39% ofthe total global trading volume ofA&L shares traded during the twelve-month period ended July 11,2008. As ofJuly 14,2008, the date on which the Acquisition was announced, the Acquisition consideration represented a premium of approximately 36.4% for A&L's shareholders (based on the July 11 closing prices for the Santander Shares and A&L shares) and a premium of approximately 44.6% for such shareholders (based on the July 11 closing prices for the Santander Shares and A&L shares and taking into account an interim dividend that A&L contemplates declaring prior to the effective date of the Acquisition).
IV. Application of Regulation M
In connection with the Acquisition, Santander will distribute Santander Shares to A&L shareholders, some of whom are expected to reside in the United States, and may therefore be considered to be engaged in a distribution in the United States for purposes ofRegulation M. Pursuant to Rule 100 under Regulation M, the Restricted Period will begin on the day that the proxy statement/offering document is first mailed to A&L shareholders and will end once A&L's shareholders have approved the Acquisition at the Shareholders' Meeting. Thus, as noted above, the Restricted Period is likely to last approximately one month (or potentiallylonger in the event of a competing offer for A&L). II The file number for the Fonn F-6 relating to this program is 333-] 51735.

James A. Brigagliano 15 August 18, 2008
As business units of Santand~rthat, from time to time, purchase Santander Shares for their own accounts and the accounts of others and recommend and exercise investment discretion with respect to the purchase of Santander Shares, the Companies may be deemed to be "affiliated purchasers" of Santander, as defined in Rule 100 ofRegulation M. In addition, none ofthe Companies currently intends to participate in the proxy solicitation effort relating to the Acquisition; accordingly, they would not be deemed to be "distribution participants" as defined in Rule 100 and, thus, would be subject to Rule 102 of Regulation M. 12 Under Rule 102, the Companies will not be permitted to bid for or purchase, or attempt to induce any person to bid for or purchase, Santander Shares during the Restricted Period unless one ofthe specified exceptions under Rule 102 is available. There are no exceptions available under Rule 102 that would permit the Companies to engage in the market-making, derivatives hedging, asset management, insurance and unsolicited brokerage activities described in Section II ofthis letter. Therefore, without the requested exemptive relief, the Companies would not be permitted to engage in these activities for an extended period of time, which is likely to last approximately one month (or potentially longer in the event of a competing offer for A&L). Santander believes that the withdrawal ofthe most important market participant and the only market maker in Santander Shares in the primary market for those shares, which are among the most actively traded in Spain, for such an extended period oftime would have serious harmful effects in the home market and, indirectly, in the U.S. market, for the Santander Shares. These effects could include a significant imbalance of buy and sell orders, particularly given the large number ofshares to be distributed in the Acquisition, and thus greater volatility and reduced liquidity. In addition, as the Derivatives Market Maker is a significant market maker in derivatives on Santander Shares issued by Santander, ifthe Derivatives Market Maker is precluded from conducting market making activities in the derivatives or from effecting hedging transactions in Santander Shares relating to the derivatives, the application ofRegulation M could have adverse effects on the Derivatives Market Maker's ability to manage hedge positions maintained by it and its customers previously established in connection with this activity. The Asset Managers and the Brokerage Units may also be unable to execute asset-management related or unsolicited brokerage orders submitted by their customers in the normal course, thereby forcing their customers to take their orders elsewhere or to refrain from trading. Similarly, the 12 If any ofthe Companies participated in the solicitation effort, they would likely be considered a "distribution pal1icipant" and thus would be subject to Rule lOl ofRegulation M. Under Rule 101, none ofthe Companies
would be permitted to bid for or purchase, or attempt to induce any person to bid for or purchase, Santander Shares during the Restricted Period, unless one of the specified exceptions under Rule 101 were available. As the available exceptions under Rule 101 would not permit the Companies to engage in most ofthe activities for which relief is being sought in this letter, we ask that the exemption that we are requesting apply whether these Companies are subject to Rule 101 or Rule 102.

James A. Brigagliano 16 August 18, 2008
Asset Managers and the Insurance Company have a fiduciary duty to the investors ofthe Managed Funds and to the purchasers oftheir insurance products to oversee the investments in a manner that is in the best interests ofthose purchasers. Accordingly, the Asset Managers and the Insurance Company may not refrain from, or engage in, trading in Santander Shares or, as the case may be, derivatives, including listed and over-the-counter options, warrants, convertible securities and other structured products related to Santander Shares or baskets or indices including Santander Shares, as well as index futures on the foregoing, as a result ofinvestment instructions received from Santander, unless such action is in the best interests ofthe purchasers ofthose policies. The derivatives market making and hedging, asset management, insurance and unsolicited brokerage activities described in this letter are also important aspects of Santander's business as a major financial institution in Europe and, therefore, interrupting those activities for such an extended period could also have an adverse impact on Santander's business, including its ability to properly manage its risks. As noted above, Santander Shares would easily qualify as actively traded securities that are exempt under Rule 101(c)(l), with a value of average daily trading volume for the twelve months ended December 31, 2007 and the six months ended June 30,2008 of approximately €1,190.63million ($1,738.68 million) and €1,188.69 million ($1,871.95 million), respectively, and a public float value in excess of $1 00 billion. Regulation M normally would not interfere with market-making and other market activities in actively traded securities, such as the Santander Shares. However, because the Companies are affiliated purchasers ofthe issuer, they may not rely on the actively traded securities exception to do what market makers and brokers for large U.S. issuers are normally allowed to do during distributions by those issuers. In addition, the Acquisition is being conducted in accordance with applicable English law and trading in Santander Shares by the business units and affiliates of Santander identified herein during the Acquisition distribution is subject to and will be conducted in accordance with applicable Spanish law and other applicable non-U.S. laws. As discussed in greater detail below, applicable Spanish law provides important safeguards against the type ofrisk of abuse that Regulation M was designed to prevent. Finally, Santander believes that the risk ofmarket manipulation by the Companies is limited by the "Chinese Wall" procedures and fiduciary duties described above, the fact that the market activities that are the subject ofthis request for exemptive relief are the ordinary course market activities ofthe Companies rather than activities commenced or managed in contemplation ofthe Acquisition, and the fact that the jurisdictions in which the Companies operate have laws which prohibit
market manipulation (as further discussed below). For the foregoing reasons, Santander asks the Staffto provide an exemption from Regulation M that would allow the Companies to continue to engage in marking making, derivatives market making and hedging, asset management, insurance and unsolicited brokerage activities with respect to

James A. Brigagliano 17 August 18, 2008
Santander Shares and ADSs in the ordinary course oftheir respective business as described above during the Restricted Period, as permitted under market practice and applicable law in their home jurisdictions.
V. The Spanish Regulatory Market
The principal regulations that apply to the Spanish Companies' market activities under Spanish law are the Spanish Securities Market Act (the "SSMA"), Royal Decree 1333/2005, as amended (relating to market abuse), Royal Decree 217/2008 (relating to regulations governing the activities of investment firms and conduct on the Spanish Exchanges).)3 The SSMA established an independent regulatory authority, the CNMV, to supervise the securities markets. The SSMA governs, among other things, trading gractices, insider trading and disclosure. In particular, Articles 83 ter,14 and 99(i) 5 ofthe SSMA prohibit market manipulation. Under the SSMA, the CNMV oversees price formation, execution and the settlement oftransactions to ensure that insider trading, price manipulation and other breaches oflaw may be detected. The CNMV has a division which has responsibility for market supervision, monitoring compliance, investigating violations and imposing disciplinary measures. The CNMV also takes measures to ensure that information necessary to maintain a transparent market is made public. This applies, in particular, to the prices and volumes of securities traded on and offthe Spanish Exchanges. The Spanish Criminal Code provides remedies for abusing confidential information that is likely to influence the prices ofsecurities. Market manipulation and dissemination offalse rumors to affect the prices oflisted securities to realize a gain are prohibited. The breach of professional secrecy, insider trading and price manipulation in Spain are criminal offenses. In particular, Article 284 ofthe Spanish Criminal Code establishes criminal liability for employment of any mechanism with the intent to alter prices that would otherwise result from a free market for, among other things, securities. Jl European anti-market abuse legislation is found principally in EU Directive 2003/6/CE, which has been incorporated into Spanish law in the SSMA and in Royal Decree 133312005. 14 Article 83 ter provides:
Any person or entity acting or otherwise related to the securities markets shall refrain from engaging in activities that may falsify the free development of prices in the securities markets. 15 Article 99 provides:
The following acts or omissions constitute extremely serious infringements by the individuals and institutions referred to in Article 95 hereof [including brokers, market makers and their respective officers]:
(i) breach of Article 83 tel' ifsuch breach has a material adverse effect on the price [of the relevant security]. If the effect on the price is not material, this would still constitute a serious infringement, in accordance with Article 100.

James A. Brigagliano 18 August 18, 2008
Under Spanish law, Santander and its subsidiaries are prohibited from purchasing Santander Shares unless the purchase of Santander Shares is generally authorized at a meeting ofshareholders of Santander, and Santander creates reserves equal to the acquisition price of any Santander Shares that are actually purchased. In addition, the total number of Santander Shares held by Santander and its subsidiaries may not exceed 5% ofthe total capital stock of Santander. Spanish law requires that the CNMV be notified each time Santander and its subsidiaries acquire, on an aggregate basis, 1% ofthe outstanding capital stock of Santander (without deducting any sales of Santander Shares which may have been made during that time period). In addition, the Bank of Spain requires Santander to provide monthly reports ofthe number of Santander Shares held by Santander and its subsidiaries, the number of Santander Shares held for hedging purposes and the number of Santander Shares held by third parties whose purchase was either financed by or pledged to Santander or any ofits subsidiaries. Pursuant to Spanish regulations relating to conduct in the securities markets, the Spanish Brokerage Units must keep records oforders received from any third party regarding Santander Shares and any other security as well as the execution ofsuch order. The Spanish Brokerage Units also must keep records relating to transactions in which they are acting as principals. The information contained in such records must include identification ofthe client, the number, type and price ofsecurities bought or sold and the market on which the transaction is eifected. These records must be made available to the CNMV upon request. In addition, the Market Making Subsidiary, the Derivative Market Maker, the Spanish Asset Managers and the Insurance Company must also maintain records relating to the transactions in which they engage, including the number, type and price ofsecurities bought or sold. The jurisdictions in which the Companies other than the Spanish Companies operate generally have anti-market manipulation, insider trading and record-keeping laws and regulations similar to those governing market activities in Spain.
VI. Relief Requested
As discussed above, Santander is seeking exemptive relief from Rules 101 and 102 ofRegulation M to permit the Market Maker, the Derivatives Market Maker, the Asset Managers, the Insurance Company and the Non-U.S. Brokerage Units to continue to engage in the market making, derivatives market making and hedging, asset management, insurance and unsolicited brokerage activities described in this letter during the Restricted Period. The Market Maker, the Derivatives Market Maker, the Asset Managers, the Insurance Company and the Non-U.S. Brokerage Units would conduct these activities in the ordinary course oftheir business and in accordance with a;pplicable law, all as described in this letter. Santander also asks for reliefto permit the U.S. Brokerage Units, Banco Santander International and the Puerto Rico Asset Manager to engage in their respective activities in the normal course of business and in accordance with applicable local law, as described in this letter.

James A. Brigagliano 19 August 18,2008
As a condition to the relief being requested, Santander would undertake to include disclosure in the proxy statement/offering document that will be distributed to A&L shareholders. The disclosure would be substantially similar to the following:
Since the announcement ofthe Acquisition, Santander, through certain identifiable business units, and celtain of its affiliates have engaged and intend to continue to engage in various dealing and brokerage activities involving Santander Shares outside the United States. Among other things, Santander, through an affiliate, has made a market, from time to time, and intends to continue to make a market, from time to time, in the Santander Shares by purchasing and selling Santander Shares for its own account in Spain on the Spanish Exchanges. Certain mutual fund management companies, pension fund management companies, asset management companies and insurance companies that are affiliates of Santander have purchased and sold, and intend to continue to purchase and sell, Santander Shares and derivatives, as pmt oftheir ordinary investing activities and/or as part ofthe investment selections made by their clients. Santander, through its derivatives business units, has also engaged, and intends to continue to engage, in dealings in Santander Shares and derivatives for their accounts and for the accounts oftheir respective customers for the purpose of market making of derivatives or of hedging their respective positions established in connection with certain derivatives activities (such as options, warrants, futures and other instruments, including stock options issued by Santander) relating to Santander Shares entered into by Santander and its affiliates and their respective customers. Santander, through its brokerage business units, has also engaged, and intends to continue to engage, in unsolicited brokerage transactions in Santander Shares with Santander's customers. These activities occurred and are expected to continue to occur through the AQS, on the Spanish Exchanges, the stock exchanges of Milan, Lisbon, Buenos Aires, London and Mexico and in the over-the-counter market in Spain or elsewhere outside the United States. Santander's affiliates in the United States also have engaged and may continue to engage in unsolicited brokerage and asset management transactions in Santander Shares and Santander ADSs in the United States. In addition, Santander's affiliates in Puerto Rico have engaged and may continue to engage in unsolicited brokerage transactions in Santander Shares and Santander ADSs in Puerto Rico and may purchase Santander Shares and Santander ADSs in connection with asset management activities in Puerto Rico. Santander is not obliged to make a market in . Santander Shares and any such market making may be discontinued at any time. All ofthese activities could have the effect of preventing or retarding a decline in the market price ofthe Santander Shares.

James A. Brigagliano 20 August 18, 2008
Santander has sought and received from the SEC certain exemptive relieffrom Regulation M in order to permit its identifiable business units and affiliates to engage in the foregoing activities during the Restricted Period. As a further condition to the relief being requested, Santander and each of the Companies will undertake to keep records (the "Records") ofthe date and time when any Santander Shares are purchased or sold, the market in which the purchase or sale is effected, the amount of Santander Shares purchased or sold and the price ofthe purchase or sale, for each purchase or sale of Santander Shares made during the Restricted Period. This information will not include any client-specific data, the disclosure of which is restricted under local law. Santander will maintain Records for a period oftwo years following the completion ofthe Acquisition. Upon the written request ofthe Director ofthe Division ofTrading and Markets ofthe SEC, Santander will make a copy ofthe relevant Records available at the SEC's offices in Washington, D.C. We note that Santander is seeking similar exemptive relief from the Takeover Panel in the United Kingdom relating to the market activities ofthe Companies described in Section II ofthis letter. Furthermore, in order to comply with the regulations under the Takeover Code under the laws ofthe United Kingdom, Santander is publicly disclosing, and will continue until the end ofthe Restricted Period (and potentially longer in the event of a competing offer for A&L) to publicly disclose, the amount of Santander Shares and certain Santander Share Derivatives purchased or sold by the Companies (other than any such Santander Shares or Santander Share Derivatives purchased or sold pursuant to unsolicited brokerage transactions) and the price ofsuch purchase or sale during the Restricted Period by 12:00 p.m. (London time) on the business day following each such purchase or sale, as well as the resulting amount of Santander Shares held by the Companies (on a consolidated basis). In connection with the relief requested by Santander in this letter, please note that substantially similar exemptive relief from Rule 101 and Rule 102 of Regulation M was granted to Santander with respect to market making, derivatives hedging, asset management, insurance and unsolicited brokerage activities under your exemptive letter dated September 10, 2004 and to Banco Bilbao Vizcaya Argentaria, S.A. under your exemptive letter dated June 25, 2007, substantially similar exemptive relief from Rule 101 and Rule 102 of Regulation M was granted to Allianz AG with respect to market making, derivatives market making and hedging and unsolicited brokerage activities under your exemptive letter dated April 10,2003 and similar exemptive relieffrom Rule 102 of Regulation M was granted to Santander with respect to derivatives market making and hedging, asset management, insurance and unsolicited brokerage activities relating to shares ofthe Royal ,Bank of
Scotland under yow exemptive letter dated July 23, 2007.

James A. Brigagliano 21

August 18, 2008
If you have any questions about this request, please do not hesitate to contact me (212-450-4950). We appreciate your assistance in this matter. Nicholas A. Kronfeld Copy to:
Mr. Jose Manuel de Araluce
Banco Santander, S.A.
Ciudad Grupo Santander
28660 Boadilla del Monte (Madrid)
Kingdom of Spain