Securities Activities of Banks in the GLB Era - Cleary Gottlieb Steen ...

9. Review/evaluation of outsourcing contracts. 39
10. Focus on compliance with banking and securities law requirements in
connection with international securities transactions/linkages, 40 in
terms of (a) licensing, 41 and (b) supervision. 42
39 See, e.g., NASD Notice to Members 05-48 (July 2005) (broker-dealer due diligence
and supervisory responsibilities when outsourcing activities to third-party service
providers, and prohibition on outsourcing activities requiring registration or
qualification, or supervisory or compliance responsibilities); New York Stock
Exchange (“NYSE”) proposed Rule 340 (see SEC Release No. 34-51240 (March 16,
2005) (solicitation of public comments) (procedures with respect to the outsourcing
of services and functions by NYSE members)); Basel Committee/International
Organization of Securities Commissions (“IOSCO”)/International Association of
Insurance Supervisors Report: Outsourcing in Financial Services (February 2005).
See also Bank Activities Guide at Part I.B.6.f and Part IX.B.2.
40 See Bank Activities Guide at Part XI.D.
41 See, e.g., CIBC Mellon Trust, SEC Admin. Proc. No. 3-11839 (March 2, 2005)
(settled administrative action against CIBC Mellon Trust for failing to register as a
transfer agent or as a broker-dealer in connection with its activities as administrator
of employee stock plans for issuers for which CIBC Mellon acted as transfer agent);
SEC v. CIBC Mellon Trust, SEC Litigation Release No. 19081 (February 16, 2005)
(charge of employee participation in fraudulent scheme to promote, sell and
distribute stock of non-U.S. company through illegal issuance of stock certificates;
CIBC Mellon charged with having failed to train its employees with respect to U.S.
securities laws, or create systems to assure compliance with U.S. securities laws
despite providing transfer agent services to U.S. publicly-traded companies).
42 See, e.g., CSFB, SEC Admin. Proc. No. 19081 (February 16, 2005) (failure (i) to
supervise an employee who engaged in improper trading on behalf of a non-U.S.
subsidiary which CSFB failed to detect since the employee’s only supervisor was an
employee of the non-U.S. subsidiary located outside of the U.S., and was not
properly licensed as a supervisor at CSFB; and (ii) to establish systems to
implement supervisory procedures to track and monitor supervisory appointments to
ensure that all registered representatives in the U.S. were assigned to a properly
licensed supervisor).
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