BISA Recommends Changes to SEC’s Proposed Reg R

Washington, D.C. (April 2, 2007) — Following extensive discussion with its members and its board of directors, and after taking comments at its Annual Meeting, the Bank Insurance & Securities Association (BISA) filed its comments and recommendations with the Board of Governors of the Federal Reserve System (FRB) and the United States Securities and Exchange Commission (SEC).

BISA and its members appreciate the work of the FRB and SEC that went into the latest revisions to Proposed Reg R that will, when implemented, define the required organizational relationships necessary to deliver certain securities products and services and how referral fees may be paid to non-registered personnel.

"As with any regulation as complex as Reg R, there are many pros and cons. The dialogue that was established during this process has proven to be a valuable tool in fostering communications between the agencies and the industry, and we hope it will continue," said Richard D. Starr, BISA’s Director of Government Relations. "While there is more clarity on some issues, there remain several elements that are more problematic than prior versions."

In summary, BISA believes the "Networking Exemption" in the current proposal is more limited than that permitted in prior statements. The proposed prohibition of non-cash referral fees is unlikely to result in the desired customer protections. And, by prohibiting incentive compensation for non-registered persons, they will likely not encourage customers to utilize the investment products and services they want and need. BISA believes that the Gramm-Leach-Bliley Act was not intended to unduly limit a bank’s ability to determine a bona fide bonus system.

The Financial Services Regulatory Relief Act of 2006 required proposal of Reg R within 180 days of the law’s enactment. Although the proposal envisions implementation by yearend 2008, some observers believe that extending implementation to yearend 2009 will be necessary due to its complexity and the technology commitment to implement.

BISA is the largest association representing financial institutions in selling securities and insurance in the bank distribution channel. Its 400 institutional members are a cross section of banks, thrifts, credit unions and the various business that support their products and services. BISA has members in all fifty states and its publications are distributed to 22,000 institutions and persons throughout the United States and North America.

For additional information please contact Richard D. Starr, BISA Director of Government Relations, at rstarr@bisanet.org.