SEC Adopts New Rules Addressing the Bank Exceptions to Broker-Dealer Registration in the Gramm-Leach-Bliley Act

The Securities and Exchange Commission
announced today that it has adopted interim final rules that address the
bank exceptions to broker-dealer registration in the Gramm-Leach-Bliley Act.  
These statutory provisions, which are effective as of May 12, 2001, replace
the banks’ long-standing full exception from broker-dealer registration with
15 functional exceptions.  Banks that limit their securities activities to
these 15 functions remain excepted from broker-dealer registration.  Banks
that engage in additional securities activities, however, either will need
to register as broker-dealers or shift those additional activities to registered
broker-dealers.

The interim final rules adopted today respond to questions raised in recent
months by banks, securities firms, and other interested groups about the
application of the broker-dealer exceptions.  The Commission is soliciting
comments on all aspects of the interim final rules and will amend them as
appropriate in response to comments received.    

Some of the interim final rules adopted today address interpretive questions
received by the Commission by defining key terms used in the 15 new exceptions.  
Other rules provide targeted exemptions that are consistent with the functional
exceptions.  

The Commission also is adopting temporary exemptions that give banks additional
time to comply with the new statutory requirements.  These rules will extend
the full exception for banks from broker-dealer registration until October 1, 2001.  
They also will give banks until January 1, 2002 before their compensation
arrangements must meet the conditions of certain statutory exceptions from the
definition of broker as well as the compensation provisions of the newly granted
exemptions.  In addition, the rules give banks a temporary exemption that protects
them from rescission actions arising from a failure to correctly determine
broker-dealer status.

Finally, the Commission is adopting a rule that will treat savings associations
and other thrifts - which are not considered “banks” under the federal securities
laws - the same as banks for broker-dealer registration purposes.

The text of the new interim final rules will be available on the Commission’s
website at http://www.sec.gov/rules/finrindx.htm.