WASHINGTON — The Securities and Exchange Commission and Board of Governors of the Federal Reserve System announced Dec. 18, the release of joint proposed rules to implement the "broker" exceptions for banks under Section 3(a)(4) of the Securities Exchange Act of 1934.
These exceptions were adopted as part of the Gramm-Leach-Bliley Act of 1999. The SEC and the Board approved issuing the joint proposed rules for public comment at separate open meetings held on Dec.13 and Dec. 18, respectively.
The proposed rules would help define the scope of securities activities that banks may conduct without registering with the SEC as a securities broker and would implement the most important "broker" exceptions for banks adopted by the GLB Act. Specifically, the proposed rules would implement the statutory exceptions that allow a bank, subject to certain conditions, to continue to conduct securities transactions for its customers as part of the bank's trust and fiduciary, custodial and deposit "sweep" functions, and to refer customers to a securities broker-dealer pursuant to a networking arrangement with the broker-dealer.
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The proposed rules are designed to accommodate the business practices of banks and to protect investors, both agencies said. In developing these proposed joint rules, the agencies said they consulted extensively with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Office of Thrift Supervision. Credit unions are not included in the proposal.
"Credit unions are not included in the proposal as the reg relief law did not provide express authority for credit unions as it did for thrifts on certain securities powers," said Mary Mitchell Dunn, CUNA senior vice president and associate general counsel. "However we have been in contact with the SEC on this, including a letter, and are meeting with key SEC staff in January."
After the Oct. 13, 2006 signing of the Financial Services Regulatory Relief Act, the SEC and Fed had 180 days from the date of enactment to jointly issue and adopt proposed rules implementing the bank broker exemptions. A final set of jointly adopted rules will supersede any other proposed or final rule issued by the SEC on or after the date of enactment of Gramm-Leach-Bliley, both regulators said.
NAFCU said it would also be following the next phase of movement from the regulators on rules to implement bank broker-dealer exemptions as they relate to both credit unions and CUSOs.
Comments on the proposed rules are requested within 90 days of publication in the Federal Register, which was expected soon at press time. The agencies are requesting comment on all aspects of the proposed rules. –[email protected]
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