The ICBA told Congress on August 2 that the SEC's interim final rule to implement the securities title of the Gramm-Leach-Bliley Act is "incompatible with congressional intent and would impose unworkable and burdensome requirements" on community banks. Testifying before the Financial Institutions and Capital Markets subcommittees of the House Financial Services Committee, the ICBA said the rule should be revised and re-issued for comment.
The rule, issued on May 11, was intended to establish guidelines that would allow banks to continue to offer their customers certain traditional banking services that involve securities activities without registering as a broker-dealer or creating a broker-dealer affiliate. The Gramm-Leach-Bliley Act included specific exceptions for such activities because banks have been offering these services for years without problems. Such services include trust, fiduciary and custodial activities.
K. Reid Pollard, president and CEO of Randolph Bank and Trust Co. in Asheboro, N.C., testifying on behalf of the ICBA, said the exceptions in Gramm-Leach-Bliley are "extremely important" for community banks and their customers, because "registering as a broker-dealer is simply not an option for most small banks." The net effect of the SEC's interim final rule, he said, is to "nullify the statutory exceptions. If community banks lose these exceptions, customers in many rural areas might not have anywhere else to turn for these services."
ICBA commended the SEC for extending the compliance date and comment period, but said the SEC should fix this rule based on public comments on the revised proposal and defer compliance for at least 12 months after publishing a final rule. "This is critical to allow banks the time to adapt systems, procedures and products and services."