of the most recognizable custody services provided by banks is for individual retirement accounts ( iras ). under applicable internal revenue service regulations, banks may act as custodians for iras, and bank - offered custodial iras provide consumers throughout the nation with a convenient and economical way to buy and sell securities for retirement purposes on a tax - deferred basis. banks, as part of their customary banking activities and as an accommodation to their customers, also have long permitted customers that hold securities in custody accounts at the bank to buy and sell securities related to the account. these services allow customers to avoid the unnecessary expense of having to establish a separate securities account at a broker - dealer to effect such trades. other securities services traditionally offered by banks include " sweeping " deposit funds into overnight investment vehicles, such as money market mutual funds, privately placing securities for customers, and providing transfer agency services to issuers and benefit plans. banks have offered these services to their customers without significant concerns for years. it is important, moreover, to highlight that these activities are not unregulated – they are supervised, regulated, and examined by the relevant federal and state banking agencies. in the trust and fiduciary area, these protections are enhanced and supplemented by well - developed principles of state and federal trust and fiduciary law that provide customers with strong protections against conflicts of interests and other potential abuses. bank examiners regularly examine a bank's trust and fiduciary departments for compliance with these fiduciary principles. these examinations frequently are conducted by examiners who have received special training in trust and fiduciary law and practice, and the federal banking agencies assign banks engaged in fiduciary activities separate ratings under the uniform interagency trust rating system. these ratings are based on an evaluation of, among other things, the capability of management ; the adequacy of the bank's operations, controls, and audits ; the bank's compliance with applicable law, fiduciary principles and the documents governing the account ; and the management of fiduciary assets. glb act it was in the context of this existing regulatory framework that the congress, during consideration of the glb act, reviewed the blanket exception for banks from the definitions of " broker " and " dealer " in the securities exchange act. this review of the blanket exception was not undertaken because abuses or concerns existed concerning the traditional securities activities of banks. in fact, banks generally

other hand, to continue to accept orders from their custodial clients. these sec - granted exemptions, which could be revoked or modified by the sec at any time in the future, would not be necessary if the rules gave effect to the language and purposes of the custody exception adopted by the congress. furthermore, these exemptions are subject to numerous and burdensome restrictions that were not contemplated by the act and that will make it difficult, if not impossible, for many banks to take advantage of the exemptions. the glb act already requires that banks send any u. s. securities trades for a trust or fiduciary account to a registered broker - dealer for execution. see 15 u. s. c. § 78c ( a ) ( 4 ) ( c ). see 15 u. s. c. § 78c ( a ) ( 4 ) ( b ) ( viii ). third - party networking arrangements the glb act also permits banks to establish so - called " networking " arrangements with registered broker - dealers, under which the broker - dealer makes securities brokerage services available to the bank's customers. one provision of the statutory exception permits bank employees who are not registered representatives of the broker - dealer to receive a nominal, one - time cash fee for the referral of customers to the broker - dealer so long as payment of the fee is not contingent on whether the referral results in a securities transaction. this exception was intended to reflect and codify the arrangements that the sec staff has sanctioned in no - action letters issued to the banking and securities industries concerning networking arrangements. these letters, like the statutory exception, permit bank employees to receive a nominal, one - time fee for the referral of customers to the broker - dealer, and do not attempt to establish a rigid mechanism for determining what constitutes a " nominal " fee in every circumstance. this flexible approach has worked well for both the banking and securities industries and has not, to our knowledge, caused significant problems. despite the success of this flexible approach, the interim final rules establish a rigid and complex approach for determining whether a referral fee is " nominal. " in addition, the rules impose, or request comment on, other restrictions on referral fees that were not authorized by the congress. for example, the rules provide that a referral fee is nominal if it does not exceed one hour of the gross cash wages of the employee receiving the fee. by pegging permissible fees to the hourly wage of