SEC Adopts Final Rules Exempting Banks From The Definition Of Dealer – Compliance Date September 30, 2003

The U.S. Securities and Exchange Commission has adopted final rules concerning when banks meet the Exchange Act definition of “dealer,” as modified by the Gramm-Leach-Bliley Act (GLBA). Effective September 30, 2003, a bank that engages in the purchase and sale of securities for its own account as part of a regular business will need to register with the SEC as a dealer, unless an exception applies. In addition to the statutory exceptions from the term dealer, the SEC has expanded the types of activity not requiring registration, as described below.

The SEC noted that there is a two-part test for whether a bank must register as a dealer: (1) Is the bank buying and selling securities for its own account; and (2) is the bank effecting such purchases and sales as part of a regular business? A bank is not a dealer unless the answer to both questions is yes. If all of the bank’s securities activities fall within one of the exceptions from the definition of dealer, discussed below, the bank also need not register.

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