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

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11. Focus on compliance with the USA PATRIOT Act and the BSA, including in respect of SAR filing and implementation of adequate know-your-customer procedures. 43 12. Sensitivity to special concerns relating to broker-dealer/investment adviser and related compliance responsibilities. 44 a. Compliance with the SEC’s “Dealer Push-out Rules”, which limit the activities of U.S. banks, as principal, involving certain securities. 45 These Rules became effective on October 1, 2003 (although the SEC adopted an exemption for contracts entered into before March 31, 2005 from being considered void or voidable by reason of a violation of brokerdealer registration requirements based solely on the bank’s status as a dealer when the contract was created). 46 b. Top areas of interest for current SEC/NASD broker-dealer examinations include: 47 43 See, e.g., Oppenheimer & Co., NYSE Hearing Panel Decision 05-181 (December 29, 2005) (failure to establish an adequate anti-money laundering compliance program and failure to establish and implement policies and controls designed to achieve compliance with the BSA); Bush & Carroll, “Suspicious Activity Reporting: Recent Developments and Guidance on Key Issues”, Review of Banking & Financial Services (November 2005). See also Bank Activities Guide at Part VIII.A. 44 See Bank Activities Guide at Part IX.E. 45 See SEC Release No. 34-47364 (February 24, 2003); SEC Staff Compliance Guide to Banks on Dealer Statutory Exceptions and Rules (September 2003). See also Bank Activities Guide at Part II.C and Part II.D.3.b. 46 See 1934 Act Rule 15a-8. 47 See, e.g., Remarks of SEC Office of Compliance Inspection and Examinations Associate Director Gohlke, November 14, 2005; Remarks of SEC Office of Compliance Inspections and Examinations Associate Director Gadziala, October 19, 2005, June 23, 2005. See also, SEC Release No. 2006-4 (January 4, 2006) (framework for determining whether, and if so to what extent, to impose civil penalties against a corporation); SEC Litigation Release No. 19517 (January 3, 2006) (fn. cont.) 62
(i) Conflicts of interest, including (A) disclosure-related issues (e.g., payments by mutual funds to brokerdealers and the use of soft dollars), (B) misuse of customer trading information or other non-public information, (C) allocation of limited products, services or opportunities to favored clients or provision of special incentives or payments for use of products or services, (D) use of products or services of affiliates or favored clients, (E) playing multiple roles in a transaction or with respect to an issuer or client, (F) biased research and advice, (G) accounting, booking or reporting to achieve other interests, and (H) gifts and entertainment to and from clients). (ii) Sales practices (including suitability, disclosure of risks, costs and fees, unauthorized trading, churning, switching, misrepresentation of performance results and recommending home mortgages to fund securities purchases), with special emphasis on mutual funds and variable annuities. (iii) Trading and pricing practices (including best execution). (fn. cont.) (SEC action against former officers of Putnam Fiduciary Trust Company for fraudulent activity; SEC announcement that it would not bring any enforcement action against the Trust Company “because of its swift, extensive and extraordinary cooperation in the [SEC]’s investigation of the [subject] transactions [including] . . . prompt self-reporting, an independent internal investigation, sharing the results of that investigation with the government (including not asserting any applicable privileges and protections with respect to written materials furnished to the [SEC] staff), terminating and otherwise disciplining responsible wrongdoers, providing full restitution to its defrauded clients, paying for the attorneys’ and consultants’ fees of its defrauded clients, and implementing new controls designed to prevent the occurrence of fraudulent conduct”). 63
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SIA COMPLIANCE AND LEGAL DIVISION A
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of the Comptroller of the Currency
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circumstances where products includ
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strongly criticize the Board for pu
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standard of bank “coercion” req
Page 11 and 12: ank can show that a customer has on
Page 13 and 14: (iv) A study on the tying of lendin
Page 15 and 16: (i) A prospective borrower to provi
Page 17 and 18: a reward for previously providing c
Page 19 and 20: C. Exceptions to the Anti-Tying Pro
Page 21 and 22: (14) Asset management services prov
Page 23 and 24: (B) in accordance with this policy,
Page 25 and 26: where the tied product is to be pro
Page 27 and 28: . Foreign Transactions Safe Harbor
Page 29 and 30: 3. Although affiliates of a bank ge
Page 31 and 32: the bridge loan is made to purchase
Page 33 and 34: dealer affiliate is purportedly inv
Page 35 and 36: . The Proposed Anti-tying Interpret
Page 37 and 38: G. NASD Developments mixed-product
Page 39 and 40: (B) financial institutions with bet
Page 41 and 42: a. National regulators will still n
Page 43 and 44: 2. There is a key relationship betw
Page 45 and 46: C. Complex Structured Finance Trans
Page 47 and 48: eview. “Higher risk transactions
Page 49 and 50: (i) Written policies and procedures
Page 51 and 52: d. In an apparent divergence from t
Page 53 and 54: “reporting up” rules under Sect
Page 55 and 56: incurring fiduciary obligations, ad
Page 57 and 58: intraday extension of credit at the
Page 59 and 60: merchants, money transmitters, chec
Page 61: 9. Review/evaluation of outsourcing
Page 65 and 66: (i) Whether the access of senior le
Page 67 and 68: and payments involving use of clien
Page 69 and 70: eports and are promptly addressed,
Page 71: NEW YORK One Liberty Plaza New York
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