Federal Register / Vol. 71, No. 247 / Tuesday, December 26, 2006 / Notices 77557 

1As defined in Exchange Act Sections 3(a)(4) and 

3(a)(5) [15 U.S.C. 78c(a)(4) and 78c(a)(5)]. 2See Definition of Terms in and Specific 

Exemptions for Banks, Savings Associations, and 

Savings Banks Under Sections 3(a)(4) and 3(a)(5) of 

the Securities Exchange Act of 1934, Exchange Act 

Release No. 44291 (May 11, 2001), 66 FR 27760 

(May 18, 2001) (the ‘‘Interim Rules’’). See also 

Exchange Act Release No. 49879 (June 17, 2004), 69 

FR 39682 (June 30, 2004) (‘‘Regulation B’’). In the 

Interim Rules, the Commission adopted Exchange 

Act Rule 15a–7, 17 CFR 240.15a–7, which, as 

proposed to be amended, would provide banks and 

other financial institutions until January 1, 2006, to 

begin complying with the GLBA. In proposing 

Regulation B, the Commission proposed Rule 781 

as a re-designation of Rule 15a–7. See 17 CFR 

242.781. 3See Exchange Act Release No. 44570 (July 18, 

2001); Exchange Act Release No. 45897 (May 8, 

2002); Exchange Act Release No. 46751 (Oct. 30, 

2002); Exchange Act Release No. 47649 (April 8, 

2003); Exchange Act Release No. 50618 (Nov. 1, 

2004); Exchange Act Release No. 51328 (March 8, 

2005); Exchange Act Release No. 52405 (Sept. 9, 

2005); and Exchange Act Release No. 54544 

(September 29, 2006), 71 FR 58891 (October 5, 

2006) (extending the exemption from the definition 

of ‘‘broker’’ until January 15, 2006); During this 

time, the Commission also extended the temporary 

exemption from the definition of ‘‘dealer’’ to 

September 30, 2003. See Exchange Act Release No. 

47366 (Feb. 13, 2003). On February 13, 2003, the 

Commission adopted amendments to certain parts 

of the Interim Rules that define terms used in the 

dealer exceptions, as well as certain dealer 

exemptions (‘‘Dealer Release’’), see Exchange Act 

Release No. 47364 (Feb. 13, 2003), 68 FR 8686 (Feb. 

24, 2003). Therefore, this order is limited to an 

extension of the temporary exemption from the 

definition of ‘‘broker.’’ 

4Pub. L. 109–351, 120 Stat. 1966 (2006). 

5Under the Regulatory Relief Act, a final single 

set of rules or regulations jointly adopted in 

accordance with that Act shall supersede any other 

proposed or final rule issued by the Commission on 

or after the date of enactment of Section 201 of the 

GLBA with regard to the definition of ‘‘broker’’ 

under Exchange Act Section 3(a)(4). 

6Exchange Act Release No. 54946 (Dec. 18, 2006). 

7Section 401 of the Regulatory Relief Act also 

amended the definition of ‘‘bank’’ in Section 3(a)(6) 

of the Exchange Act to include any Federal savings 

association or other savings association the deposits 

of which are insured by the FDIC. Accordingly, as 

used in this order, the term ‘‘bank’’ includes any 

savings association that qualifies as a ‘‘bank’’ under 

Section 3(a)(6) of the Exchange Act, as amended. 8 15 U.S.C. 78mm. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–54948; File No. S7–12–01] 

Order Extending Temporary Exemption 

of Banks From the Definition of 

‘‘Broker’’ Under Section 3(a)(4) of the 

Securities Exchange Act of 1934 

December 18, 2006. 

I. Background 

The Gramm-Leach-Bliley Act 

(‘‘GLBA’’) repealed the blanket 

exception of banks from the definitions 

of ‘‘broker’’ and ‘‘dealer’’ under the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) 1 and replaced it with 

functional exceptions incorporated in 

amended definitions of ‘‘broker’’ and 

‘‘dealer.’’ Under the GLBA, banks that 

engage in securities activities either 

must conduct those activities through a 

registered broker-dealer or ensure that 

their securities activities fit within the 

terms of a functional exception to the 

amended definition of ‘‘broker.’’ 

The GLBA provided that the amended 

definitions of ‘‘broker’’ and ‘‘dealer’’ 

were to become effective May 12, 2001. 

Starting on May 11, 2001, in connection 

with various rulemaking proposals,2 the 

Securities and Exchange Commission 

(‘‘Commission’’) extended, most 

recently until January 15, 2007, a 

temporary exemption that gave banks 

time to come into full compliance with 

the more narrowly-tailored exceptions 

from broker-dealer registration under 

the GLBA.3

On October 13, 2006, President Bush 

signed into law the ‘‘Financial Services 

Regulatory Relief Act of 2006 

(‘‘Regulatory Relief Act’’).’’4 Among 

other things, the Regulatory Relief Act 

requires the Commission and the Board 

of Governors of the Federal Reserve 

(‘‘Board’’) jointly to adopt final rules 

implementing the bank broker 

exceptions in Section 3(a)(4) of the 

Exchange Act. It also requires that 

within 180 days of passage of the 

Regulatory Relief Act, the Commission 

and the Board jointly issue proposed 

rules.5

Consistent with the Regulatory Relief 

Act, the Commission today proposes 

implementing rules jointly with the 

Board.6 As a result, the Commission is 

also granting banks 7 an exemption from 

compliance with the definition of broker 

until July 2, 2007, to permit the 

Commission and the Board time to 

receive comments, evaluate the 

comments on the implementing rules, 

and to take final action on the 

implementing rules. 

II. Extension of Temporary Exemption 

From Definition of ‘‘Broker’ 

In connection with the proposal of the 

implementing rules pursuant to the 

Regulatory Relief Act, the Commission 

finds that extending the temporary 

exemption for banks from the definition 

of ‘‘broker’’ is necessary and appropriate 

in the public interest, and is consistent 

with the protection of investors. In 

connection with this extension, the 

Commission notes that the 

implementing rules are being proposed 

with a request for comment and that the 

Commission and the Board will need 

time to give careful consideration to the 

comments and determine what changes, 

if any, should be made to the 

implementing rules. Recognizing that 

banks will need substantial time to 

come into compliance with final rules 

adopted by the Commission and the 

Board, we believe that extending the 

exemption from the definition of 

‘‘broker’’ for banks until July 2, 2007, 

will prevent banks from unnecessarily 

incurring costs to comply before final 

implementing rules are jointly adopted. 

Further, the extension will give the 

Commission and the Board time to 

consider fully comments received on 

the implementing rules and take any 

final action on the proposal as 

necessary. 

III. Conclusion 

Accordingly, pursuant to Section 36 

of the Exchange Act,8

It is hereby ordered that banks are 

exempt from the definition of the term 

‘‘broker’’ under the Exchange Act until 

July 2, 2007. 

By the Commission. 

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 06–9841 Filed 12–22–06; 8:45 am] 

BILLING CODE 8011–01–P 


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