[Federal Register: March 14, 2005 (Volume 70, Number 48)]
[Notices]
[Page 12517]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14mr05-112]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51328/File No. S7-12-01]
Order Extending Temporary Exemption of Banks, Savings
Associations, and Savings Banks From the Definition of ``Broker'' Under
Section 3(a)(4) of the Securities Exchange Act of 1934
March 8, 2005.
I. Background
The Gramm-Leach-Bliley Act (``GLBA'') repealed the blanket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 it with functional exceptions incorporated in amended
definitions of ``broker'' and ``dealer.'' Under the GLBA, banks that
engage in securities activities either must conduct those activities
through a registered broker-dealer or ensure that their securities
activities fit within the terms of a functional exception to the
amended definitions of ``broker'' and ``dealer.''
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\1\ As defined in Exchange Act sections 3(a)(4) and 3(a)(5) [15
U.S.C. 78c(a)(4) and 78c(a)(5)].
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The GLBA provided that 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 (``Interim Rules'') to define certain terms used in, and
grant additional exemptions from, the amended definitions of ``broker''
and ``dealer.'' \2\ Among other things, the Interim Rules extended the
exceptions and exemptions granted to banks under the GLBA and Interim
Rules to savings associations and savings banks. They also included a
temporary exemption that gave banks time to come into full compliance
with the more narrowly-tailored exceptions from broker-dealer
registration.\3\ To further accommodate the banking industry's
continuing compliance concerns, the Commission delayed the effective
date of the bank ``broker'' and ``dealer'' rules through a series of
orders that, among other things, ultimately extended the temporary
exemption from the definition of ``broker'' to March 31, 2005.\4\
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\2\ See Definition of Terms in and Specific Exemptions for
Banks, Savings Associations, and Savings Banks Under Sections
3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934, Exchange
Act Release No. 44291 (May 11, 2001), 66 FR 27760 (May 18, 2001).
\3\ 17 CFR 240.15a-7.
\4\ See Exchange Act Release No. 44570 (July 18, 2001); Exchange
Act Release No. 45897 (May 8, 2002); Exchange Act Release No. 46751
(Oct. 30, 2002); Exchange Act Release No. 47649 (April 8, 2003); and
Exchange Act Release No. 50618 (Nov. 1, 2004) (extending the
exemption from the definition of ``broker'' until March 31, 2005).
During this time, the Commission also extended the temporary
exemption from the definition of ``dealer'' to September 30, 2003.
See Exchange Act Release No. 47366 (Feb. 13, 2003). On February 13,
2003, the Commission adopted amendments to certain parts of the
Interim Rules that define terms used in the dealer exceptions, as
well as certain dealer exemptions (``Dealer Release''), see Exchange
Act Release No. 47364 (Feb. 13, 2003), 68 FR 8686 (Feb. 24, 2003).
Therefore, this order is limited to an extension of the temporary
exemption from the definition of ``broker.''
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In June 2004, the Commission proposed Regulation B, which would
revise and replace the Interim Rules.\5\ The comment period for
Regulation B expired on September 1, 2004,\6\ and the Commission has
received over 120 comments on the proposal, including comments from the
banking industry, banking regulators, and members of Congress.
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\5\ Exchange Act Release No. 49879 (June 17, 2004), 69 FR 39682
(June 30, 2004).
\6\ See Exchange Act Release No. 50056 (July 22, 2004) 69 FR
44988 (July 28, 2004) (extending comment period on Regulation B
until September 1, 2004).
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II. Extension of Temporary Exemption from Definition of ``Broker''
The Commission is carefully considering comments to determine what
final action should be taken with regard to the Regulation B proposal.
The Commission anticipates that this review process will not be
completed before the exemption from the Interim Rules relating to the
definition of ``broker'' expires on March 31, 2005.\7\
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\7\ In the Interim Rules, the Commission adopted Exchange Act
Rule 15a-7, 17 CFR 240.15a-7, which, as proposed to be amended,
would provide banks and other financial institutions until January
1, 2006, to begin complying with the GLBA. In proposing Regulation
B, the Commission proposed Rule 781 as a re-designation of Rule 15a-
7. See 17 CFR 242.781.
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Therefore, the Commission finds that extending the temporary
exemption for banks, savings associations, and savings banks from the
definition of ``broker'' 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
``broker'' until September 30, 2005, will prevent banks and other
financial institutions from unnecessarily incurring costs to comply
with the statutory scheme based on the current Interim Rules and will
give the Commission time to consider fully comments received on
Regulation B and take any final action on the proposal as necessary,
including consideration of any modification necessary to the proposed
compliance date.
III. Conclusion
Accordingly, pursuant to section 36 of the Exchange Act,\8\ it is
hereby ordered that banks, savings associations, and savings banks are
exempt from the definition of the term ``broker'' under the Exchange
Act until September 30, 2005.
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\8\ 15 U.S.C. 78mm.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-1059 Filed 3-11-05; 8:45 am]
BILLING CODE 8010-01-P