SECURITIES AND EXCHANGE COMMISSION
Release No. 34-46751; File No. S7-12-01
October 30, 2002
Order Extending Temporary Exemption of Banks, Savings Associations, and Savings Banks from the Definition of "Dealer" under Section 3(a)(5) of the Securities Exchange Act of 1934
The Gramm-Leach-Bliley Act ("GLBA") repealed the blanket exception of banks from the definitions of "broker" and "dealer" under the Securities Exchange Act of 1934 ("Exchange Act")1 and replaced this full exception with functional exceptions incorporated in amended definitions of "broker" and "dealer." Under the statute, banks that engage in securities activities either must conduct those activities through a registered broker-dealer or assure that their securities activities fit within the terms of a functional exception to the amended definitions of "broker" and "dealer."
Under the GLBA, the amended definitions of "broker" and "dealer" were to become effective May 12, 2001. On May 11, 2001, the Securities and Exchange Commission ("Commission") issued interim final rules ("Rules") to define certain terms used in, and grant additional exemptions from, the amended definitions of "broker" and "dealer."2 The Rules included Rule 15a-7, which gave banks a temporary exemption from the definitions of "broker" and "dealer" until October 1, 2001, and provided an additional conditional exemption until January 1, 2002. The Rules also included Rule 15a-9, which extended the exceptions and exemptions granted to banks under the statute and Rules to savings associations and savings banks.3 On July 18, 2001, the Commission issued an Order providing banks, savings associations, and savings banks an additional conditional exemption from the definition of "broker" and "dealer" under the Exchange Act until May 12, 2002.4 On May 8, 2002, the Commission extended the exemption from the definition of "broker" until May 12, 2003 and from the definition of "dealer" until November 12, 2002.5 The effect of these orders was to delay the date for compliance with the new statutory scheme under the GLBA.
II. Extension of Temporary Exemption from Definition of "Dealer"
Today, the Commission has issued a release proposing to amend the Rules, defining the terms utilized in the bank dealer exception and amending and adding to the bank dealer exemptions. In order to permit time for public comment, analysis of the comments received, and adoption of final rules, additional time is needed.
For this reason, the Commission finds that extending the temporary exemption of banks, savings associations, and savings banks from the definition of "dealer" is necessary and appropriate in the public interest, and is consistent with the protection of investors. The Commission believes that extending the exemption from the definition of "dealer" until February 10, 2003 will prevent banks from unnecessarily incurring costs to comply with the statutory scheme based on the current Rules rather than the Rules when amended and will give the Commission time to fully consider comments received on these Rules and amend the Rules as necessary.
When final rules are adopted, they will provide banks with a sufficient transition period to bring their operations into compliance with the new statutory scheme based on the guidance (and exemptions) provided in the amended Rules. The Commission does not expect banks to develop compliance systems for the provisions of the GLBA discussed in the Rules until the Commission has adopted amendments to the Rules.
Accordingly, pursuant to Section 36 of the Exchange Act [15 U.S.C. 78mm],
IT IS HEREBY ORDERED that banks, savings associations, and savings banks are exempt from the definition of the term "dealer" under the Exchange Act until February 10, 2003.
By the Commission.