Alert July 08, 2008

FRB and SEC Agree to Share Information, Collaborate and Coordinate Efforts to Oversee Financial Services Firms

The FRB and the SEC signed a memorandum of undertaking (“MOU”), effective upon signing, that, although not legally binding, reflects the FRB’s and SEC’s intent to collaborate, cooperate, coordinate examinations and share information “in areas of common regulatory and supervisory interest to facilitate their oversight of financial services firms.”  The MOU covers cooperation and sharing of information concerning bank holding companies (including bank holding companies affiliated with a broker or dealer or that control a primary dealer), and Consolidated Supervised Entities (that own securities firms).  The FRB and SEC intend to share information and collaborate with respect to areas that include:  (1) bank brokerage activities; (2) clearance and settlement in the banking and securities industries; (3) regulation of transfer agents; and (4) anti-money laundering compliance (including compliance with the Bank Secrecy Act and rules and orders issued by OFAC).  The MOU supplements rather than supersedes prior agreements and informal arrangements between the FRB with SEC, including the recent FRB and SEC arrangement in which they cooperated, coordinated their efforts and shared information concerning banking and investment banking capital, liquidity and funding.  A good discussion of the background of the MOU and the potential implications of the MOU on capital requirements appears in the July 8, 2008 issue of the Wall Street Journal at page C3, column 3.