SEC spells out securities broker-dealer rules for bankers - Silicon Valley / San Jose Business Journal:

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Many banks have been anticipating the most recentr rulechanges -- implementinf licensed banker programs that allow those who aren'tg securities broker-dealers to sell money market funds and designinhg incentives for bankers to refer clients to securities brokerse for products they're not allowed to sell -- even before the finalp clarifications of laws governing those programs were released. The new rules issued by the SEC on 19 make clearer how banks can act as and partnedrwith broker-dealers without causing increasex scrutiny by auditors, bankers say.
A benefit to bankws is being able to offer more products and services to clients from onebrancyh location, says Suzanne a senior vice president at Wells Fargp in the Greater Bay area. "I would say that our licenser banker program and the abilitty of any employee in our bank branchj to refer those customers to a broker or to ourlicenseds bankers, this absolutely is the kind of legislationm that provides those choices for our customer and educates them much more," Ramos says.
"Beforew you might have had one broketr in the store and now you can be talking to a tellere and making a deposit and haveyour five-year-olrd child with you and the teller can say 'haver you planned for funding your child's education? We have someonr here to help you.'" One of the main changex was clarification of how much bankers can be compensatede for referring clients to broker-dealers who trade or sell securities. The rules spell out that bank employeedswho aren't licensed securities brokerw can receive $25 or about two hours pay for referring clientzs to somebody who is licensed.
Since it wasn'y clear if or by how much they coulrd be compensated for referring clientwsto broker-dealers before the latest SEC rulez were issued, "it's unlikely they'd necessariluy be introducing those services" to clients, says Lauriew Moss, president of SVB Securities, part of Silicoj Valley Bank. That means banks might not have had the incentivee to tell clients about productxs and services they were barred fromselling themselves, Moss says. Becausre Silicon Valley Bank has its own SecuritiexBrokers division, a referral service is built in.
But bankw that don't offer securitieas services will find they have new guidelines when decidin g what incentives to offerd bank employees for referrinyg businessto broker-dealer partners. The rule are clarifications of the1999 Gramm-Leach-Blilegy Act which established new rules for The new rules finalized this year, creating specific exceptione from those requirements for "Driving this a long time ago was therde were bank institutions that wanted to have the abilituy to expand into related financial areas," says Kevin A. Zambrowicz, a partner at Bingham McCutchenm law firmin D.C., who helped draft some of the origina l 1999 legislation on which the curren rules are based.
"They wantedc to have the opportunity, maybe not but to affiliate with non-bank financial institutions. So large broker-dealerw like Charles Schwab mightt be able to affiliate with large banking And (banks might be able to) expandx into insurance as well." "Banks were asking 'how can we buildd up and offer new Zambrowicz says. "In 2001 -2007 ther e was great deal of uncertainthy created because no one knew exactlu what the rules of the roadwoulde be. Now we have a better gauges of that.
" Wells Fargo, which has its own broker-dealer affiliatse in Wells Fargo Investments, has been anticipatint the rules for year andoffering broker-dealer servicezs that predate the Gramm-Leach-Bliley Act. Ramos, with Wellzs Fargo, says the legislation has beena "living, breathing" document for the past eighg years and that all financial institutions tried to comply with their own interpretations of it and keep program conservative enough that when rulesw were issued, programs would comply. "Obviously Gramm-Leach-Blileuy made the line between bank depository institutionds and securities firms even thinner than it was Ramos says.
"It allowed for a lot of thing that had to be done separately to be donemore It's also been complex. And things changd along the way. But this is one that was expecte d in the industry and the industry was looking for clarification and theyprovided that."