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Consolidate Federal Regulators, Says GAO; SEC Delays Broker Rule
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Gramm-Leach-Bliley modernized banking; now it’s time to update how banks are supervised, according to a General Accounting Office report. The GAO’s controversial recommendations include consolidating all financial regulators into a single agency, creating a separate oversight structure for large complex entities, and organizing oversight along functional areas. The study focuses on bank, securities, and futures regulators.
        Just seven days prior to the public release of the GAO report, the Securities and Exchange Commission announced its decision to put its broker exception rule on hold for a second time.
 

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OCC Sanctions Bank Guarantees of Mutual Fund Return
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To level the playing field with non-bank mutual funds, national banks may guarantee the returns on mutual funds, the OCC says. Good news for banks, but “principal-protected” funds have a downside, say critics who see them primarily as a means to increase fee income.
 

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New Legal Strategy Seeks to Skirt Stock-Drop Roadblocks
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Investing in employer securities for pension plans or personal trusts is never without fiduciary risk, especially in a bear market. However, recent federal court rulings have reduced this risk both for purchasing and holding employer stock. But plaintiffs and their legal counsels may have found an end run strategy. The new strategy, an outgrowth of the ruling in Tittle v. Enron, focuses on the failure to disclose information as the breach, rather than the drop in share price. If this argument succeeds, industry legal experts warn that “every corporate decision by a business manager will become suspect and subject to ERISA.”
 

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Participants Continue to Invest in Employer Securities
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Despite widespread coverage of the risks assoicated with employer stock, it remains one of the most popular 401(k) investment options, according to a Hewitt Associates survey.
 

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Supreme Court to Rule on IRA Status in Bankruptcy
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In 2003, more than a million chapter 7 bankruptcy petitions were filed in the U.S. Whether IRA assets of those petitioners were beyond the reach of creditors depended on where one lived. Federal appeals courts are split as to whether IRA assets are exempt. Traditional trusteed pension assets are generally beyond the reach of creditors. To settle this split of opinions, the U.S. Supreme Court on December 1 heard oral arguments on this issue in the case of Rousey v. Jacoway. The Court is expected in to rule in early 2005. Legal experts say the Court is very likely to find that IRA assets are exempt.
 

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OTS Reaffirms Thrift Fiduciary Preemption
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The OCC’s contention that national banks are allowed to branch without regard to state law prohibitions still remains in question, according to legal experts. However, the authority of thrifts to do so is more clearly established in federal law. Nevertheless, Illinois regulators have questioned a Florida thrift’s authority to locate an office in Illinois.
 

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OCC Interpretive Letter
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Approves trust officers waiver for filing beneficial ownership reports.
 

-- Copyright ©2004 A.M. Publishing, Inc., Trust Regulatory News
 

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

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