Trust Updates Archive

20070508--TRN, BofA SEC Adopts Bank-Friendly Broker-Dealer Rules

19, 2007--Chicago, IL)--It's only taken 6 years, but the U.S. Securities and Exchange Commission today adopted new bank-friendly broker-dealer rules--often referred to as "push-out" or "carve-out" rules. The new rules, developed jointly with the Federal Reserve, will allow banks to continue performing traditional activities within the bank and its trust area without SEC oversight, according to the American Bankers Association.

"These new rules should ease the uncertainty that has discouraged banks from exploring new business models and products in the trust and investment area," according to Beth Climo, executive director, ABA Securities Association. "Customer's needs--and not unresolved regulation--can now be the main focus for banks."

Some consumer advocates disagree, asserting that the new proposals put consumer protection at risk because bank investment advice and brokerage services will not be subject to SEC oversight.

The controversy surrounding the SEC's original proposal, issued in 2001, stems from interpretations of provisions in the Gramm-Leach-Bliley Act (GLBA).

The SEC took the position that the GLBA repealed banks' blanket broker and dealer exemptions under the Securities Exchange Act of 1934 and replaced them with functional exemptions. This was in stark contrast to the position taken by the banking industry, bank regulators, and congressional leaders who vigorously argued that the GLBA did not intend to alter the exemption. In a regulatory rarity, the heads of the Federal Reserve Board, the FDIC, and the OCC twice sent joint letters to the SEC objecting to its original proposals.

For more on this topic, see the upcoming issue of Trust Regulatory News.

No statement in this issue is offered as or should be
construed as legal opinion or advice

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