Alert November 18, 2008

Regulation R On Track to Take Effect on January 1, 2009

As a reminder, on January 1, 2009, Regulation R – the joint regulation of the Federal Reserve Board (“FRB”) and Securities Exchange Commission (“SEC”) implementing the bank brokerage provisions of the Gramm-Leach-Bliley Act (“GLB Act”) – will become effective for all banks and thrifts in the United States.  Under Regulation R, banks and thrifts will no longer enjoy blanket exemptions from the definition of “broker” in the federal securities laws and, effectively, will have to “push out” various securities activities to SEC-registered broker-dealers and conform other securities activities to fit within Regulation R’s detailed requirements.  

In recent conferences and public presentations, the FRB and SEC staff have re-affirmed the January 1 compliance deadline and have said that the agencies will not extend the deadline in light of the financial markets crisis.  Moreover, we understand some banks already have faced regulatory inquiries about their plans and efforts to ensure compliance with the new regulation.  Goodwin Procter’s financial services practice includes several lawyers with substantial expertise if you have questions or need assistance with Regulation R compliance.