SEC Proposes Rules Addressing Circumstances When Banks Must Register As Brokers Or Dealers

On October 30, 2002, the SEC proposed rules under the Gramm-Leach-Bliley Act (GLBA) addressing some of the securities activities banks may engage in without having to register as brokers or dealers with the SEC. Although GLBA would mandate that banks transfer many of their securities activities into broker-dealer affiliates or risk being required to register with the SEC, the SEC has granted a general exemption from those requirements until next year, giving the SEC time to adopt workable rules and the industry time to come into compliance with those rules.

The recent proposals impact (1) banks that engage in riskless principal transactions, (2) banks that underwrite and sell asset-backed securities, and (3) banks that engage in securities lending.

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