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ICBA Critical of SEC Proposed Regulation B

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Washington, D.C. (September 2, 2004) - The Independent Community Bankers of America (ICBA) today criticized a proposed new series of rules issued by the Securities and Exchange Commission. The rules, known as Regulation B, implement the exceptions that banks have from the definition of the term "broker" under of the Securities Exchange Act of 1934 as amended by the Gramm-Leach-Bliley Act (GLBA).

"Although Regulation B is an improvement over the interim rules that were issued and then suspended three years ago, the regulation is still unnecessarily complex and reflects a too-narrow reading of the statutory exceptions provided by GLBA" said Karen M. Thomas, ICBA executive vice president. "Congress intended for banks to be able to continue providing their customers with traditional banking services that involve securities transactions-such as fiduciary and custodial services. But proposed Regulation B is so burdensome, unnecessarily complicated and restrictive that it essentially nullifies many of the statutory exceptions. As a result, many banks will be forced to discontinue services to the detriment of their customers and contrary to Congressional intent."

In a comment letter to the SEC, ICBA suggested a number of ways that the regulation could be less burdensome for community banks and still achieve the SEC goal of investor protection. ICBA recommended that the asset size test for the small bank custodial exemption be raised to $1 billion, the "chiefly compensated" test for fiduciary activities be simplified, the networking restrictions be revised to give banks more flexibility to compensate employees for referrals, and that thrifts be given complete parity with banks under the regulation. ICBA praised the SEC staff for the time they have taken to meet with industry representatives and trade associations in an attempt to draft a workable rule.

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