Alert June 05, 2012

FRB Approves Final Rule Allowing SHCs to Elect to be Supervised by FRB

The FRB approved a final rule (the “Final Rule”) setting forth the procedures for securities holding companies (“SHCs,” and each an “SHC”) to follow should they wish to elect  (as permitted by Section 618 of the Dodd-Frank Act) to be supervised by the FRB.  An SHC is a nonbank company that owns at least one registered securities broker or dealer.  An SHC may elect to be supervised by the FRB if it wishes to meet requirements of a regulator in a foreign country that the company be subject to comprehensive consolidated supervision in the U.S. if the company wishes to operate in that foreign country.  The Final Rule specifies the information that the SHC must provide to the FRB (including information concerning organizational structure, capital and financial condition) to be registered for FRB supervision.  The Final Rule notes, however, that with respect to capital, the FRB may modify its capital rules to account for differences in activities and structure of SHCs and bank holding companies.  An SHC supervised by the FRB will be supervised and regulated as if it were a bank holding company, but will not be subject to Bank Holding Company Act restrictions on nonbanking activities.  The Final Rule will become effective on July 20, 2012.