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ICBA Commends Agencies for Proposed SEC Regulation R

Washington, D.C. (March 29, 2007)—The Independent Community Bankers of America (ICBA) commended the Securities and Exchange Commission (SEC) and the Federal Reserve Board for their proposal to implement new rules which more clearly define the services banks can offer their customers without registering as a broker under federal securities laws.

"Proposed SEC Regulation R is significantly more flexible, simple and accommodative than any of the previous proposals for implementing the broker exceptions for banks," said Karen Thomas, ICBA executive vice president for government relations. "The new rules should allow community banks to continue conducting traditional banking activities that involve securities transactions and, at the same time, provide adequate safeguards to protect investors."

ICBA recommended a number of improvements to the regulation, including changing the definition of a "nominal" referral fee to accommodate more community bank third party referral programs and offered strong support for an exception that would permit banks to sweep deposit accounts into mutual funds that did not meet the definition of "no-load." The association also commended the SEC and the Federal Reserve for recognizing that accepting orders for the purchase or sale of securities has always been a core custody activity for banks.

The SEC has proposed rules to implement the broker exceptions for banks several times since passage of the Gramm-Leach-Bliley Act in 1999, most recently in 2004 with proposed Regulation B. Proposed Regulation B was heavily criticized by ICBA, other industry groups and bank regulators for its narrow interpretation of the statutory "broker" exceptions. In 2006, Congress passed the ICBA-endorsed Financial Services Regulatory Relief Act of 2006 which included a requirement that the Federal Reserve and the SEC jointly issue proposed rules to implement the broker exceptions within 180 days of the law's enactment.