SEC Revises Rules to Exempt Banks on Brokers Regulations
- The Securities and Exchange Commission voted to seek the public's thoughts on plans to revise a rule spelling out when banks would be exempt from being treated as brokers.
The SEC will seek public comment until Aug. 1 and aims to adopt final rules by the end of the year. It had proposed interim final rules in 2001 but delayed the effective date until November 2004 amid intense criticism from banks and bank regulators.
"I do not believe that our dialogue is over," SEC Chairman William Donaldson said as the agency met to consider the revised plan. If approved by the five-member commission, the new rules would take effect by January 2006.
Mr. Donaldson and other SEC officials urged banks and bank customers to weigh in on the revised proposal. In particular, SEC officials said banks need to provide hard data demonstrating what effect the SEC's plan would have on their business.
"We're looking for hard numbers and real world examples," rather than speculation, said Annette Nazareth, SEC market-regulation division director.
Under the newest proposal, the SEC would provide more flexibility to exempt banks, credit unions and savings and loans that engage in certain securities transactions from being regulated as brokers. The proposal would allow lenders to conduct such business under the supervision of bank regulators and avoid being regulated as brokers by the SEC, provided they meet certain conditions.
A revised rule has been a long time in coming partly because of extensive consultations with bank-industry members and regulators, SEC Commissioner Cynthia Glassman said.
SEC Commissioner Roel Campos said he thinks the revision has been "painstakingly crafted" so that banks won't have to make big changes to current business operations. But Commissioner Paul Atkins raised concerns that it sets "seemingly arbitrary thresholds," and he urged banks to comment, saying they should "speak now or forever hold their peace."
The SEC has wrestled with bank exemptions since Congress adopted the Gramm-Leach-Bliley Act of 1999 and allowed banks to affiliate with other financial-services firms, including brokerage firms. The shift eliminated a longstanding exemption that precluded banks from being regulated as broker-dealers. Instead, Congress specified that some bank securities activities would have to be handled by brokerage affiliates while others could remain within banks under specific exemptions.
The SEC approved dealer exemptions only in 2003, shelving the more contentious brokerage portion of the rule. SEC officials say the revised plan was designed to address concerns about imposing costly burdens on banks to prove they can retain business within the bank, rather than push it out to a brokerage operation.
Exemptions based on whether banks are "chiefly compensated" for sales activities or for their relationships with bank customers have been modified in the latest proposal. The original SEC plan set strict limits, demanding that banks obtain no more than 10% of their revenue from sales, with no remedy for banks exceeding that target.
Under the revised plan, the SEC would allow banks to evaluate their compensation based on bankwide operations, separate lines of business, or an account-by-account basis, allowing up to 50% of compensation per account to be derived from sales. Banks would be free to use one or more methods and would have a year to fix potential problems. As further help, banks may exceed the compensation targets by 10% once every five years without losing their exemption, the SEC said.
The plan also would create additional exemptions for small banks with less than $500 million of assets doing custody business, allowing them to avoid the compensation calculations if they meet certain qualifications. Among other things, qualifying small banks cannot be part of a large bank holding company, have an affiliated broker-dealer, or be paid more than $100,000 a year for securities transactions.
Larger banks also would come under a more flexible approach, and all existing personal custody accounts would be excluded from new rules to avoid disrupting existing relationships, the SEC said.
Banks may continue to pass along charges from a broker-dealer who executes a customer's trade, and may continue to receive servicing fees and 12b-1 fees from mutual funds, the SEC added. So-called 12b-1 fees are meant to cover fund marketing and distribution expenses. SEC officials said the revised plan would permit banks to accept such fees even if they exceed a quarter percentage point.
In addition, the SEC added three new exemptions. One would permit banks to handle trustee, escrow and other accounts invested in money-market funds that pay 12b-1 fees, and a second would allow bank trustees to receive asset-based sales and service fees from mutual funds to offset plan administration costs. The third would permit banks to sell unregistered securities outside the U.S., to non-U.S. citizens, subject to certain restrictions.
Networking arrangements between banks and brokerage operations would be permitted as well. Congress specified that such deals are allowable provided any referral payments to bank employees are nominal. The SEC expanded on its earlier definition to include a one-time $25 fee or an inflation-adjusted amount.
"When all's said and done, I think there are still going to be some securities activities conducted in banks," Robert Colby, deputy director of the SEC's market-regulation division told the SEC. Given that, the division's chief counsel, Kate McGuire, said commissioners will have to determine that whether regulation is sufficient to protect those who invest through banks.
SEC将给予银行不同于经纪商的地位
证券监管部门就银行业对其一项建议的批评作出回应，加快了有关规定的制定工作。这些规定将涉及银行在何种条件下能够享受不被作为经纪商对待的豁免权。
美国证券交易委员会(SEC)曾于2001年拟定临时的最终规定，但因受到银行和银行监管部门的强烈批评，而把生效时间推迟至2004年11月。该机构目前希望在年底前就最终规定进行表决。
根据这项最新建议，SEC将在豁免开展部分证券业务的银行、信贷协会和储蓄及贷款机构的经纪商身份方面表现出更大灵活性。该建议将使金融机构在满足特定条件的情况下，得以在银行监管部门的监督下开展此类业务，而不会作为经纪商被SEC监管。
SEC主席唐纳森(William Donaldson)周三在一个讨论该建议的会议上表示，他认为SEC和银行业的对话尚未结束。
唐纳森和SEC的其他官员还敦促银行客户对修改后的建议提出意见。SEC官员特别指出，银行业需要提供能够显示SEC计划对其业务将产生何种影响的数据。
如果该建议能够在SEC第二轮投票中获得通过，新规定将在2006年1月以前开始生效。
