Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, September 20, 2007

SEC Adopts Bank Broker Rules

The SEC voted to adopt, jointly with the Board of Governors of the Federal Reserve System (Board), new rules that will finally implement the bank broker provisions of the Gramm-Leach-Bliley Act of 1999. The Board will consider these final rules at its Sept. 24, 2007 meeting. The Commission and the Board consulted with and sought the concurrence of the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Office of Thrift Supervision.

In addition, the Commission also voted to issue a second release concerning certain bank dealer activities and other related matters.

"A customer should be able to walk into a financial institution and get any financial product he or she needs — securities, insurance, banking or trust services," said SEC Chairman Christopher Cox. "But Congress recognized those benefits couldn't be achieved without new ways to safeguard investors that would be consistent with continued innovation. Today's historic action, coming eight years after the passage of the law, is long overdue but welcome news for investors who will now begin to see the benefits of broader services and lower costs that the law intended."

An important provision of the Gramm-Leach-Bliley Act amended the definition of "broker" in the Securities Exchange Act of 1934 so that banks would no longer be completely excluded from the broker-dealer registration requirements. At the same time, the new law created specific exceptions from those requirements. Proposed Regulation R would give effect to these bank broker exceptions, in a way that accommodates the traditional business practices of banks, and at the same time furthers our goal of better protecting investors.

The Gramm-Leach-Bliley Act was signed into law by President Bill Clinton on Nov. 12, 1999. The Act provided an 18-month deadline for the adoption of implementing rules, but from 1999 until 2005, the rule-writing effort stalled repeatedly. On Oct. 13, 2006, President Bush signed into law the Regulatory Relief Act, which added the requirement that the Commission and the Board issue the proposed rules jointly, and seek the concurrence of the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation.

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