SEC Proposes Thrift Exception from Advisers Act, Comprehensive Disclosure Requirements for Asset Backed Securities; Adopts Supervision Programs for Broker-Dealers and Affiliates

FOR IMMEDIATE RELEASE
2004-58

Washington, D.C., April 28, 2004 -- The Securities and Exchange Commission today voted to publish for comment a rule that would provide an exception from the Investment Advisers Act for thrifts and new and amended rules and forms for registration and reporting for asset backed securities. The Commission also voted to adopt rules that would create voluntary programs to supervise broker-dealers and their affiliates on a consolidated basis.

Exception for Thrift Institutions from the Investment Advisers Act of 1940

The Commission voted to publish for comment a new rule that would provide thrift institutions with a limited exception from the Investment Advisers Act and a new rule that would exempt thrift-sponsored collective trust funds from registration and reporting requirements under the Securities Exchange Act of 1934.

• Thrifts Providing Investment Advice as Trustees, Executors, Administrators, or Guardians
   
  A thrift would be excepted from the Advisers Act when it provides investment advice in its capacity as a trustee, executor, administrator, or guardian for trusts, estates, guardianships and other accounts created and maintained for a fiduciary purpose. A thrift using this exception could not hold itself out to the public as providing investment advisory services, except in the ordinary advertising of its trustee, executor, administrator, or guardianship services for fiduciary purpose accounts.
   
• Thrifts Providing Investment Advice to Collective Trust Funds
   
  A thrift would be excepted from the Advisers Act when it advises collective trust funds and accounts that invest exclusively in them.
   
• Thrifts Providing Other Advisory Services
   
  Thrifts that provide advisory services beyond the new exceptions would be required to continue to be registered with the Commission, but could apply the Advisers Act only to accounts that fall outside the new exceptions.
   
• Exemption From Registration for Thrift-Sponsored Collective Trust Funds
   
  The Commission's proposed rules would give thrift-sponsored collective trust funds the same exemption from the registration requirements of Section 12(g) of the Exchange Act that thrift-sponsored common trust funds have.

Comments on the proposed rules should be submitted to the Commission within 60 days of their publication in the Federal Register.

Asset-Backed Securities

The Commission also voted to propose new and amended rules and forms to address comprehensively the registration, disclosure and reporting requirements for asset-backed securities under the Securities Act of 1933 and the Securities Exchange Act of 1934.

Principally, the proposals would

• update and clarify the Securities Act registration requirements for offerings of asset-backed securities, including expanding the types of asset-backed securities that may conduct delayed primary offerings on Form S-3;
   
• consolidate and codify existing interpretive positions that allow modified Exchange Act reporting that is more tailored and relevant to asset-backed securities;
   
• provide tailored disclosure guidance and requirements for Securities Act and Exchange Act filings involving asset-backed securities; and
   
• streamline and codify existing interpretive positions that permit the use of written communications in a registered offering of asset-backed securities in addition to the statutory registration statement prospectus.

The proposals considered today are intended to clarify the regulatory requirements for asset-backed securities in order to increase market efficiency and transparency and provide more certainty for the overall ABS market and its participants. These proposals will be open for public comment for a 60-day period following their publication in the Federal Register.

Broker-Dealer and Affiliate Supervision on a Consolidated Basis

The Commission decided to adopt rule amendments and new rules under the Securities Exchange Act of 1934 that will establish two separate voluntary regulatory programs for the Commission to supervise broker-dealers and their affiliates on a consolidated basis.

One program will establish an alternative method to compute certain net capital charges for broker-dealers that are part of a holding company that manages risks on a group-wide basis and whose holding company consents to group-wide Commission supervision. The broker-dealer's holding company and its affiliates, if subject to Commission supervision, will be referred to as a "consolidated supervised entity" or "CSE." Under the alternative capital computation method, the broker-dealer will be allowed to compute certain market and credit risk capital charges using internal mathematical models. The CSE will be required to comply with rules regarding its group-wide internal risk management control system and will be required periodically to provide the Commission with consolidated computations of allowable capital and risk allowances (or other capital assessment) prepared in a form that is consistent with the Basel Standards. Commission supervision of the CSE will include recordkeeping, reporting, and examination requirements. The requirements will be modified for an entity with a principal regulator.

The other program will implement Section 17(i) of the Exchange Act, which created a new structure for consolidated supervision of holding companies of broker-dealers, or "investment bank holding companies" (IBHCs) and their affiliates. Pursuant to the Exchange Act, an IBHC that meets certain, specified criteria may voluntarily register with the Commission as a supervised investment bank holding company (SIBHC) and be subject to supervision on a group-wide basis. Registration as an SIBHC is limited to IBHCs that are not affiliated with certain types of banks and that have a substantial presence in the securities markets. The rules provide an IBHC with an application process to become supervised by the Commission as an SIBHC, and will establish regulatory requirements for those SIBHCs. Commission supervision of an SIBHC will include recordkeeping, reporting and examination requirements. Further, the SIBHC also will be required to comply with rules regarding its group-wide internal risk management control system and will be required periodically to provide the Commission with consolidated computations of allowable capital and risk allowances (or other capital assessment) consistent with the Basel Standards.

Both programs will also include technical and conforming amendments to the risk assessment rules (Exchange Act Rules 17h-1T and 17h-2T).

The rules will become effective 60 days after their publication in the Federal Register.

The full text of detailed releases concerning each of these items will be posted to the SEC Web site as soon as possible.