SEC Gives Preliminary Approval to Bank Securities Exemptions

June 2, 2004 ( - The U.S. Securities and Exchange Commission (SEC) on Wednesday gave a tentative nod to rules for banks that want to get into the securities business without coming under SEC regulation.

The rules, preliminarily approved by a 5 to 0 vote, cover 11 exceptions that would let a bank avoid SEC registration while offering trust and custody services among others, Reuters reported. The proposed exemptions and conditions would codify and elaborate limits set forth in 1999 banking reforms that tore down barriers between banking and brokerage, leading to an increased blurring of the two industries.

For instance, small banks could offer custody services to customers as long as resulting revenues from securities transactions were not higher than $100,000. The rule defines small banks as those having less than $500 million in assets, no parent company with more than $1 billion in consolidated assets and no association with a brokerage.

Most banks will easily satisfy the SEC rules to remain exempt from SEC regulations, officials said. Some banks have complained about the costs of compliance, however. Only banks which have developed aggressive sales cultures recently are likely to bump against the SEC limits, possibly forcing some to change business practices, officials said.

By a 5-0 vote, the SEC gave preliminary approval to the proposals. Final adoption is expected later this year, with banks likely to be required to comply by the end of 2005.

For additional general information regarding banks’ securities regulations go to .