WASHINGTON – The House Financial Services Committee recentlyjoined bank regulators on its concerns with the SEC's Regulation Bproposal that would extend broker/dealer exemptions to creditunions, banks and thrifts. In an Oct. 14 comment letter, CommitteeChairman Michael Oxley (R-Ohio) along with 10 subcommittee chairsand ranking members, wrote they were “troubled” by claims the SEChas refused to discuss congressional intent of the proposal inlight of the interim rules under the Gramm-Leach-Bliley Act (GLBA).“While we appreciate the consideration the SEC has given toextending portions of the statutory exemptions to credit unions, wefear that, overall, this proposal will discourage depositoryinstitutions from engaging in activities that promote financialmodernization and encourage economic growth,” the committee wrote.The committee is “especially concerned that the onerous provisionsof Regulation B will make it impossible for financial institutionsto continue to provide products which they have offered for manyyears under the supervision of the banking agencies and the states.Many of these products and services cannot be offered bybroker-dealers.” Most of the committee's concerns mirror many ofthose from Federal Reserve, FDIC and OCC and it directed the SEC totake a second look at such issues as bank trust, fiduciary andcustodial exemptions, restructuring of deposit “sweep” activitiesand networking” arrangements with broker-dealers.In a 32-page, Oct.8 comment letter, Federal Reserve Board Chairman Alan Greenspan,FDIC Chairman Donald Powell, and recently retired Comptroller ofthe Currency John Hawke expressed dire concern that the exemptionsand the definition of “broker” as adopted in the Gramm-Leach BlileyAct are mired in “a SEC-created regime, that in some areas,conflicts with the existing regulatory requirements alreadyapplicable to banks, such as the Department of Labor's rules underthe Employee Retirement Income Security Act (“ERISA”). The SEC'slatest proposal revises the Interim Final Rules issued by the SECin 2001. The consensus following that rulemaking was that theinterim final rule did not conform to the meaning of the GLBA, norwas it in line with legislative history or congressional intent,the committee wrote. The SEC “wisely suspended implementation ofthe interim final rule and sought input from the federal bankingagencies, the industry and other interested parties.” “The SEC,along with the federal banking regulators, should voluntarily enterinto a joint rulemaking in order to provide any interpretativeguidance needed, while ensuring that all perspectives andimplications are considered,” the committee urged.Oxley, along with10 members of the powerful committee also pressed the SEC tofinalize the regulation while Congress is out of session. “Thiscommittee must ensure that no financial institutions are put at adisadvantage in the marketplace and that consumers are not deniedbeneficial products because of the SEC's lack of understanding ofthe federal banking laws,” the committee wrote. -

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