Speech by SEC Chairman:
Remarks at the Commission Open Meeting
Chairman Harvey L. Pitt
U.S. Securities & Exchange Commission
February 6, 2003
Good Morning. This is an open meeting of the Securities and Exchange Commission on February 6, 2003.
We have two items on the calendar this morning.
Our first item is a recommendation from the Division of Market Regulation to adopt final rules implementing the dealer provisions of the Gramm-Leach-Bliley Act. This landmark Act provides for functional regulation of securities activities by eliminating the absolute exceptions for banks from the definitions of "broker" and "dealer" under the securities laws and replacing them with specific transaction-based exceptions. In May 2001, the Commission adopted so-called "Interim Final Rules" that were intended to give banks guidance on the parameters of these new exceptions. The Commission quickly recognized that some of its rules would need amending, using an open, deliberate, and transparent process.
In approaching this task, we split the "broker" and "dealer" rules into two tracks, focusing on the dealer provisions first. During the past year and a half, the Commission and its Staff have spent a great deal of time talking to banks, banking industry groups, banking regulators and investor groups, to better understand the concerns, and to amend the dealer rules to address them. A notable provision of the Staff's recommendation is its sensitivity to the fact that banks will need adequate time to comply with these amended rules.
Next, the Commission will turn its attention to the bank "broker" rules. As this effort begins, I'm confident it will continue to be an open, deliberate, and transparent process. I encourage banks and their representatives -- as well as consumer groups and individual investors -- to share their thoughts with the Commission and its Staff early and often. I'm confident the Commission will again meet its goal of a workable system that maintains essential investor protections.
I'd like to extend special thanks to Commissioner Cyndi Glassman, who took the lead on this project and shepherded it to an incredibly professional conclusion. I'd also like to thank Annette Nazareth, Bob Colby, Caite McGuire, Lourdes Gonzalez, Paula Jenson, and Linda Sundberg for their Herculean work. And, I appreciate the contributions of our General Counsel, Giovanni Prezioso, and his team, including Meredith Mitchell and Michael Stevenson; the efforts of our Chief Economist, Larry Harris, and his able staff, including Chuck Dale and Tony Tri; and the Division of Corporation Finance, including Paula Dubberly, Mark Green, Amy Starr and Anne Krauskopf.
Our second item is Market Regulation's recommendation that we adopt our Analyst Certification regulation, affectionately known as Reg. AC. Nothing is more essential to investor confidence than the integrity of our securities markets. Investors must be confident they can rely on the truthfulness of statements made by market professionals, including views expressed by analysts in research reports and other public statements. It's also important that investors be fully informed of compensation arrangements and other conflicts that could influence an analyst's recommendations or views.
Reg. AC is carefully crafted to provide investors with that important information. It requires broker-dealers to obtain research analyst certifications regarding the truthfulness of the views expressed in their research reports and public statements and to assure investors their compensation is not dependent upon the specific recommendations or views they provide. By requiring certification of core standards of good conduct, Reg. AC will go a long way to promote the integrity of analyst research, in addition to increasing investor confidence in analyst recommendations.
I'd like to thank Annette Nazareth and Bob Colby for a second time, as well as the Market Regulation staff who worked on this rulemaking, including Larry Bergmann, Jamie Brigagliano, Tom Eidt and Racquel Russell. I'd also like to thank Giovanni Prezioso, Janice Mitnick and Michael Stevenson in the General Counsel's Office; Larry Harris and Tony Homan in the Economic Analysis Office; and Paul Roye, the esteemed director of our Division of Investment Management, for their assistance.
With that, I turn it over to you, Annette.