Regulation R "Push Out Rules"
Overview:
The SEC and the Federal Reserve Board adopted final Regulation R in September 2007. Regulation R implements the bank broker exceptions in the Gramm-Leach-Bliley Act (GLB Act) and includes other conditional regulatory exemptions for certain securities-related activities of banks. This is a significant development for banks because the GLB Act removed the total exemption from the definition of broker that banks had previously had and replaced the exemption with specific activity-based exceptions. Banks should have a comprehensive understanding of the new regulation to ensure that their securities activities comply with the GLB Act and Regulation R.The Knowledge Congress is assembling a panel of experts to tackle the important aspects of this rule in a two-hour teleconference and webinar.
Agenda:
SEGMENT 1:
<strong id="ep-name-of-speaker">Andrea R. Tokheim, Counsel, Legal Division,</strong>
<em id="ep-speaker-firm">Board of Governors of the Federal Reserve System </em>
- Overview (At beginning of presentation)
• Purpose of statutory exceptions and Regulation R.
• How the exceptions and exemptions work together.
• Common questions.
• Implementation and future steps.
- Custody Exception (To follow trust and fiduciary exception discussion)
• Overview of statutory custody exception.
• Overview of custody order-taking exemption.
• Limits applicable to different types of accounts.
SEGMENT 2:
<strong id="ep-name-of-speaker">Linda Sundberg, Senior Special Counsel (Banking and Derivatives),</strong>
<em id="ep-speaker-firm">U.S. Securities and Exchange Commission (SEC) </em>
- GLBA Networking exception and Rule 700
- The Dealer Rules, generally, and Regulation S and Securities Lending in particular
SEGMENT 3:
<strong id="ep-name-of-speaker">Judi McCormick, Director, Trust and Specialty Programs,</strong>
<em id="ep-speaker-firm">Office of Thrift Supervision </em>
- Trust & Fiduciary Activities Exception - Rule 721
- Bank Wide Chiefly Compensated Test - Rule 722
- Exemptions - Rule 723
1. Exception is only for banks and thrifts not operating subsidiaries or other subordinate entities.
2. Three main parts to the trust & fiduciary exception:
a. Effecting securities transactions in trust department or other department that is regularly
examined by bank examiners for compliance with fiduciary principles and standards.
b. Banks and thrifts must be "chiefly compensated" for securities transactions, consistent with
fiduciary principles and standards.
c. Banks and thrifts must not solicit brokerage business, other than by advertising that it effects
transactions in securities in conjunction with advertising its other trust activities.
3. Chiefly compensated test - formula based.
a. Numerator - relationship compensation
b. Denominator - all trust department compensation
4. Account by account test & bank wide test
5. Exclusions from account by account test & bank wide test
SEGMENT 4:
<strong id="ep-name-of-speaker">Victoria Pawelski, Compliance Policy Analyst, Division of Supervision and Consumer Protection,</strong>
<em id="ep-speaker-firm">Federal Deposit Insurance Corporation (FDIC) </em>
- Overview of the GLBA Third-Party Brokerage (Networking) Arrangement statutory exception
- Connection with Regulation R Rules 700 and 701 (subparagraph VI in particular)
- Explanation of Rule 700, with a focus on:
1) contingent on whether the referral results in a transaction
2) incentive compensation: the exception and the safe harbor
3) four formulas for nominal, one-time cash fee of a fixed dollar amount
- Explanation of Rule 701, with a focus on:
1) definitions of High Net Worth and Institutional customers
2) bank employee criteria
3) bank determinations and obligations
4) required contents of bank-broker-dealer agreement
5) required disclosures
SEGMENT 5:
<strong id="ep-name-of-speaker">Charles M. Horn, Partner,</strong>
<em id="ep-speaker-firm">Mayer Brown LLP </em>
- Bank employee incentive programs
• Performance-based bonus programs
• Sales contests
• Mixed product compensation programs
- Fiduciary and custody accounts
• Computing relationship and non-relationship compensation
• Custody accounts with a discretionary component
- Dual employee issues
• Compliance with FINRA Rule 3040
• Compensation issues
• Marketing issues
- General compliance/implementation programs
• Assuring enterprise-level compliance
• Need for review of “traditional” product lines and services
• Implementation timelines
SEGMENT 6:
<strong id="ep-name-of-speaker">Martin E. Lybecker, Partner,</strong>
<em id="ep-speaker-firm">WilmerHale </em>
- Regulation R: Money Market Funds, Accommodation Trades, and “Publicly Traded Securities” in Section 3(a)(4)(C).
• The Gramm-Leach-Bliley Act itself provides an exception for “sweep” accounts. Rule 740 provides some needed clarity for certain terms in the statutory exception: “deferred sales load,” “money market fund,” “no-load,” “open-end company,” and “sales load.”
• Rule 741 provides an additional exemption that permits a bank to offer and sell any money market mutual fund, whether or not it is attached to a “sweep,” so long as the bank provides the customer with any other product or service which would not require the bank to register as a broker or a dealer, and if the class or series is not no-load, the bank provides the customer with a prospectus for the securities.
• Rule 760(b) permits a bank to accept orders for securities transactions for custodial accounts (other than custody accounts for employee benefit plans and IRAs) if the bank accepts the order as an accommodation, bank employees do not receive transaction-based compensation, the fee received by the bank does not vary in a manner that is related to the quantity or price of the transaction or the fact that the bank accepted the order, the bank does not advertise the accommodation service, the bank does not emphasize the accommodation service in sales literature describing the bank’s custodial or safekeeping services, and the bank does not give investment advice or make recommendations to the relevant custody account.
• Several of the statutory exceptions (trust and fiduciary, stock purchase plans, and custody and safekeeping) impose a restriction upon a transaction being effected by the bank pursuant to that exception. Specifically, Section 3(a)(4)(C) of the Exchange Act provides that a bank effecting a transaction in any “publicly traded security” in the United States in reliance on any of these exceptions must direct the resulting trade to a registered broker-dealer for execution.
SEGMENT 7:
<strong id="ep-name-of-speaker">Christopher Cole, Senior Regulatory Counsel,</strong>
<em id="ep-speaker-firm">Independent Community Bankers of America </em>
- Issues Important to Community Banks
• Networking Exception—bank employee referral programs
• Trust & Fiduciary Exception-chiefly compensated test
• Custody and Money Market Funds Exception
- Questions from Community Bankers
• Compliance issues—what should community banks do
• Operational issues—how will banks be examined
• Specific questions concerning the exceptions
Who Should Attend:
- Bank/Broker executives
- Broker-dealer Legal Compliance Departments
- Financial Services Companies
- Banking Regulation and Finance Lawyers
- Investment Management Attorneys
** Speaker Bio to be added soon.. Keep checking back for updates. **
Linda Stamp Sundberg is a Senior Special Counsel (Banking and Derivatives) in the Division of Trading and Markets, Office of …
Judi McCormick has been working in Washington D.C. focusing on trust and asset management issues since 1989. Her DC career …
Victoria Pawelski joined the FDIC in 2007 as a Compliance Policy Analyst in the Division of Supervision and Consumer Protection, …
Charles Horn is a regulatory and transactional attorney whose practice focuses primarily on banking and financial services matters. Charles represents …
Mr. Lybecker is a partner in the Washington, D.C., office of Wilmer Cutler Pickering Hale and Dorr LLP. Mr. Lybecker …
Chris Cole joined ICBA as regulatory counsel in May 2003. Before joining ICBA, Chris served for many years as vice …
Course Level:
Intermediate
Advance Preparation:
Print and review course materials
Method of Presentation:
On-demand Webcast (CLE)
Prerequisite:
NONE
Course Code:
88989
Total Credits:
2.0 CLE
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SPEAKERS' FIRMS:
Board of Governors of the Federal Reserve System
U.S. Securities and Exchange Commission (SEC)
Office of Thrift Supervision
Federal Deposit Insurance Corporation (FDIC)
About Board of Governors of the Federal Reserve System
About U.S. Securities and Exchange Commission (SEC)
About Office of Thrift Supervision
About Federal Deposit Insurance Corporation (FDIC)
About Mayer Brown LLP
Website: https://www.mayerbrown.com/
About WilmerHale
Website: https://www.wilmerhale.com/
About Independent Community Bankers of America
Website: https://www.icba.org/