Paving the way for more bank self-dealing and...
By Lee Russ
Monday, December 18, 2006 at 05:35 PM
Proving that "we" never learn our lesson, the SEC and Federal Reserve Board have teamed up to produce a proposed new regulation that just might be setting the stage for yet another series of future scandals.The official announcement from the SEC is sufficiently dense that few people outside the financial industry would ever suspect what the proposed reg is:
SEC JOINTLY ISSUES WITH THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM RULES FOR COMMENT TO IMPLEMENT BANK BROKER PROVISIONS
SEC Issues Companion Proposal Concerning Bank Dealer Activities and Order Extending Temporary Exemption for Banks from the Definition of "Broker"
The Commission issued for comment, jointly with the Board of Governors of the Federal Reserve System (Board), rules to implement the bank broker provisions of the Securities Exchange Act of 1934 as Release No. 34-54946. The Commission also issued a companion proposal concerning certain bank dealer activities and other related matters as Release No. 34-54947. In addition, the Commission issued the temporary exemption of banks from the definition of "broker" until July 2, 2007 as Order Release No. 34-54948. (Press Rel. 2006-211).
Sounds innocuous, right? Welllll.....
From the Sarbanes-Oxley Compliance Journal:
The networking exception allows banks to refer bank customers to broker-dealers in exchange for a share of the commissions earned from the customers' accounts.
Hmmmm. Bet the prospect of sharing in the loot won't have any effect on the bank's judgment about who to recommend, right? You think there's a reason the official announcement is unintelligible?