July 17, 2001

Jonathan G. Katz
Securities and Exchange Commission
450 5th Street, NW
Washington, DC 20549-0106

Re: SEC Bank Broker-Dealer Interim Final Rules (Release File No. S7-12-01)

Dear Mr. Katz:

The Investment Division of Zions First National Bank ("Zions") appreciates the opportunity to provide comments on the Interim Final Rules ("Interim Rules") issued by the Securities and Exchange Commission (the "Commission") regarding the "push-out" provision of the Gramm-Leach-Bliley Act ("GLB Act"). Simply stated, we believe that the manner in which the Interim Rules were issued is unfair; that there are significant problems with the provisions of the Interim Rules dealing with asset-backed activities, and that the Interim Rules adopt an approach that is fundamentally inconsistent with the principles of functional regulation that underlies the GLB Act.

Let me begin by stating that we have reviewed the June 29, 2001 comments presented to you jointly by the Federal Reserve Board, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency ("banking agencies"), and fully support their position in this matter. Following is a brief discussion of what we consider to be the most significant problems associated with the Interim Rules.

Our primary concern with the Interim Rules relates to the provisions dealing with asset-backed activities as outlined in provisions of 15 U.S.C. section 78c(a)(5)(C)(iii). The GLB Act includes an exception, permitting banks to continue issuing and selling asset-backed securities to qualified investors through a grantor trust or other separate entity. This exception provides for these securities to be backed by loans, receivables or other obligation which were predominantly originated by the bank, its affiliates or a syndicate of banks of the bank is a member.

The Interim Rules have interpreted the term "predominantly originated" to mean at least 85 percent of the underlying obligations must be originated by the bank or its affiliates or a syndicate of which the bank is not an insignificant member. We feel this is far too restrictive, and would prevent banks from purchasing loans from other banks. Purchasing loans from other sources allows for greater diversification in the underlying loan pool, which, in turn, provides for better economics and execution. The provisions of the Interim Rules related to asset-backed activities would also make it difficult to build a pool of sufficient size to promote the best execution. Discouraging banks from purchasing loans would also significantly reduce the secondary market for many loans originated by small banks, which cannot securitize their portfolios due to lack of size and diversification. Ultimately, this would reduce the availability of needed credit to consumers and small businesses. We would suggest a definition of "predominantly originated" to be a majority, as determined by dollar volume, of the loans in a pool.

We also feel that the De Minimis Exception should not include riskless principal transactions as proposed under Rule 3a5-1. Such inclusion would unnecessarily restrict banks from participating in transactions where there is little or no risk to consumers or other investors. Such a prohibition only keeps banks from competing against other securities firms without providing any additional benefit or protection to investors. This is clearly not the intent of the GBL Act. Additionally, if it were determined to treat riskless principal transactions as part of the De Minimis Exception, we would object to counting as two agency transactions a trade where there is no broker or dealer. There is only one trade involving a buyer and a seller, not two. This again restricts a bank's ability to compete with other securities firms with no apparent benefit to investors. Again, this is clearly contrary to the intent of the GBL Act.

Additionally, we are in agreement with the comments submitted by the banking agencies regarding the applicability of NASD Rule 3040 to dual employee arrangements in which bank personnel serve as employees of both a bank and a broker-dealer. To apply NASD Rule 3040 to dual employees acting in their capacity as bank employees would have an adverse affect on a bank's ability to transact securities business as permitted under the GBL Act. Such application would subject a bank to one of two alternatives: 1) dual regulation by the Commission and its bank regulator, an unnecessary, expensive and time consuming proposition at best; or 2) forego utilizing dual employees to avoid such dual regulation, thus reducing the likelihood a bank could attract and retain the best employees. By not allowing employees who have received various securities licenses from the Commission to serve as dual employees, these licenses would lapse. This, in turn would require employees to re-take tests and otherwise go through the difficult and expensive licensing process, thus discouraging these employees from associating with a bank where they could not serve as dual employees. It would further remove employees that do not serve as dual employees from the continuing education requirements of the Commission. Certainly this is not what the GBL Act anticipated, nor is it in the best interest of investors. We would encourage the Commission to clarify that NASD Rule 3040 would not apply to dual employees.

Lastly, we are concerned with the manner in which the Interim Rules were issued. As the banking agencies pointed out in their comments, the Commission should have followed the normal notice and public comment process in issuing the Interim Rules. Given the magnitude of the impact of the Interim Rules on the traditional practices of bank and bank clients, we agree with the banking agencies that the process used by the Commission of publishing Interim Rules without first receiving the benefit of public comment is fundamentally unfair and inconsistent with standard practice. At a minimum, the effective date should be postponed until well after the Interim Rules have been subject to comment and final revision. This would avoid the expense and hassle of bringing a bank into compliance with the Interim Rules, only to have changed requirements under the final rules. We believe that at least a one-year transition period should be provided for banks to bring their operations into compliance once the revised rules become final.

Thank you again for the opportunity to provide comments, and for considering our comments. We would be happy to make ourselves available to assist you as you address our concerns in an effort to develop rules that are consistent with both the spirit and language of the GLB Act.


Rick D. Burtenshaw
Senior Vice President, Investment Division
Zions First National Bank