[Federal Register Volume 78, Number 138 (Thursday, July 18, 2013)]
[Rules and Regulations]
[Pages 42863-42865]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-17194]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 200 and 240
[Release No. 34-69979]
RIN 3235-AL35
Rescission of Supervised Investment Bank Holding Company Rules
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: The Securities and Exchange Commission (the ``Commission'') is
rescinding rules under the Securities Exchange Act of 1934 (the
``Exchange Act'') that established the Commission's program for
supervising investment bank holding companies. The Commission is taking
this action pursuant to the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the ``Dodd-Frank Act''), which eliminated the
applicable section effective July 21, 2011. The Commission also is
rescinding certain exemptive provisions in its broker-dealer risk
assessment rules and delegation of authority rules that pertain to the
supervised investment bank holding company program rules that are being
rescinded.
DATES: Effective Date: July 18, 2013.
FOR FURTHER INFORMATION CONTACT: Michael A. Macchiaroli, Associate
Director, at (202) 551-5525; Thomas K. McGowan, Deputy Associate
Director, at (202) 551-5521; Randall W. Roy, Assistant Director, at
(202) 551-5522; Mark M. Attar, Branch Chief, at (202) 551-5889; Carrie
A. O'Brien, Special Counsel, at (202) 551-5640, or Rachel B. Yura,
Attorney, at (202) 551-5729, Division of Trading and Markets,
Securities and Exchange Commission, 100 F Street NE., Washington, DC
20549-7010.
SUPPLEMENTARY INFORMATION: The Commission is rescinding Exchange Act
Rules 17i-1 through 17i-8 and making conforming amendments to Exchange
Act Rules 17h-1T and 17h-2T and Rule 30-3 of the Commission's Rules of
Organization and Program Management.
I. Discussion
Section 17(i) of the Exchange Act, promulgated under section 231 of
the Gramm-Leach-Bliley Act of 1999,\1\ authorized the Commission to
create a regulatory framework pursuant to which a holding company of a
broker-dealer could elect to be supervised by the Commission as a
supervised investment bank holding company (``SIBHC'').\2\ On June 8,
2004, the Commission adopted Exchange Act Rules 17i-1 through 17i-8 to
implement the framework for Commission supervision of SIBHCs under
section 17(i).\3\
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\1\ Public Law 106-102, 113 Stat. 1338 (1999).
\2\ 15 U.S.C. 78(q)(i).
\3\ Supervised Investment Bank Holding Companies, Exchange Act
Release No. 49831 (Jun. 8, 2004), 69 FR 34472 (Jun. 21, 2004)
(adopting Exchange Act Rules 17i-1 through 17i-8 to implement
Exchange Act section 17(i)). See also Supervised Investment Bank
Holding Companies, Exchange Act Release No. 48694 (Oct. 24, 2003),
68 FR 62910 (Nov. 6, 2003) (proposing rules to implement Exchange
Act section 17(i)).
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[[Page 42864]]
At the time the Commission adopted rules under Exchange Act section
17(i), the Commission amended its risk assessment rules--Exchange Act
Rules 17h-1T and 17h-2T--to exempt a broker-dealer that is affiliated
with an SIBHC from those rules in part because the SIBHC rules--in
particular, Rules 17i-5 and 17i-6--required that the ``SIBHC must make
and retain documents substantially similar to those the broker-dealer
is required to make and maintain pursuant to Rule 17h-1T'' and the
``SIBHC would be required to make reports that are substantially
similar to those the broker-dealer is required to make pursuant to 17h-
2T.'' \4\ The Commission also adopted amendments to Rule 30-3 of its
Rules of Organization and Program Management to delegate authority to
the Director of the Division of Market Regulation (now the Division of
Trading and Markets) to act on certain requests of SIBHCs.\5\
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\4\ See Supervised Investment Bank Holding Companies, 69 FR at
34480. See also 17 CFR 240.17h-1T(d)(5) and 17h-2T(b)(5). The risk
assessment rules, together with Form 17-H, establish a risk
assessment recordkeeping and reporting program. Rule 17h-1T, a
recordkeeping rule, requires a broker-dealer to maintain information
and other records concerning certain affiliated entities of the
broker-dealer. Rule 17h-2T, a reporting rule, requires a broker-
dealer to file information regarding its material affiliates on Form
17-H with the Commission.
\5\ See 17 CFR 200.30-3(a)(77) through (79).
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On July 21, 2010, President Obama signed the Dodd-Frank Act into
law.\6\ Section 617 of Title VI to the Dodd-Frank Act amended the
Exchange Act by eliminating section 17(i).\7\ The effective date of
section 617 is the ``transfer date,'' \8\ which generally is defined in
section 311 of the Dodd-Frank Act to mean one year after the date of
enactment of the Dodd-Frank Act.\9\ As a result, section 17(i) was
removed from the Exchange Act effective July 21, 2011.\10\
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\6\ Public Law 111-203, 124 Stat. 1376 (2010).
\7\ Public Law 111-203 Sec. 617(a)(1). The Dodd-Frank Act also
added section 618, which permits a company that owns at least one
registered securities broker or dealer (a ``nonbank securities
company'') and that is required by a foreign regulator or provision
of foreign law to be subject to comprehensive consolidated
supervision, to register with the Board of Governors of the Federal
Reserve System (the ``Federal Reserve'') as a securities holding
company and become subject to supervision and regulation by the
Federal Reserve. Public Law 111-203 Sec. 618. On May 29, 2012, the
Federal Reserve adopted a final rule to implement section 618 of the
Dodd-Frank Act, which permits securities holding companies to elect
to become supervised securities holding companies by registering
with the Federal Reserve. See Supervised Securities Holding Company
Registration, 77 FR 32881 (Jun. 4, 2012).
\8\ Public Law 111-203 Sec. 617(b).
\9\ Public Law 111-203 Sec. 311(a).
\10\ Section 311(b) specifies that the transfer date could be
extended to a date no later than 18 months after the date of
enactment of the Dodd-Frank Act if the Secretary of the Treasury,
after consultation with specified regulators, informed Congress of
the extension and published notice of such extension in the Federal
Register within 270 days after the enactment of the Dodd-Frank Act.
The transfer date was not extended; therefore, the transfer date was
July 21, 2011 See, e.g., 76 FR 39246 (Jul. 6, 2011) (identifying
July 21, 2011 as the ``transfer date'' in the context of the Office
of Thrift Supervision becoming part of the Office of the Comptroller
of the Currency).
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Because of the effectiveness of section 617 of the Dodd-Frank Act,
the Commission is rescinding Exchange Act Rules 17i-1 through 17i-8.
The Commission also is amending Exchange Act Rules 17h-1T and 17h-2T to
rescind subparagraphs (d)(5) and (b)(5) respectively, which contain the
conforming exemptions for broker-dealers affiliated with SIBHCs,\11\
and Rule 30-3 subparagraphs (a)(77) through (79) of the Commission's
Rules of Organization and Program Management, to remove the delegations
of authority that permit the Division Director to act on requests of
SIBHCs made pursuant to the SIBHC rules the Commission is
rescinding.\12\
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\11\ In connection with the Commission's rescission of the
exemptions in Rules 17h-1T and 17h-2T for broker-dealers that are
affiliated with an SIBHC, the Commission is: (1) Removing paragraph
(d)(5) of Rule 17h-1T and redesignating paragraph (d)(6) as
paragraph (d)(5); and (2) removing paragraph (b)(5) of Rule 17h-2T
and redesignating paragraph (b)(6) as paragraph (b)(5).
\12\ The Commission is amending Rule 30-3 of the Commission's
Rules of Organization and Program Management by removing and
reserving paragraphs (a)(77), (a)(78), and (a)(79).
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The impact of the rescission of the conforming exemptions in the
risk assessment rules is that any broker-dealer qualifying for, and
relying upon, those exemptions will now have to comply with the risk
assessment rules. However, no broker-dealers are affiliated with an
SIBHC because, as a result of the elimination of Exchange Act section
17(i) under section 617 of the Dodd-Frank Act, the Commission's SIBHC
program is no longer effective, and, accordingly, no broker-dealers can
rely on the provisions in the risk assessment rules that exempt a
broker-dealer affiliated with an SIBHC from those rules.
II. Procedural and Other Matters
The Administrative Procedure Act (``APA'') generally requires an
agency to publish notice of a proposed rulemaking in the Federal
Register.\13\ This requirement does not apply, however, if the agency
``for good cause finds . . . that notice and public procedure thereon
are impracticable, unnecessary, or contrary to the public interest.''
\14\ Further, it does not apply to interpretative rules, general
statements of policy, and rules of agency organization, procedures or
practice.\15\ The APA also generally requires that an agency publish a
rule in the Federal Register 30 days before the rule becomes
effective.\16\ This requirement, however, does not apply if the agency
finds good cause for making the rule effective sooner.\17\
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\13\ See 5 U.S.C. 553(b).
\14\ Id.
\15\ Id.
\16\ See 5 U.S.C. 553(d).
\17\ Id.
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The Commission finds good cause to have these rule rescissions and
rule amendments take effect when they are published in the Federal
Register, and that notice and solicitation of comment before the
effective date is unnecessary.\18\ In particular, as of July 21, 2011,
Rules 17i-1 through 17i-8 no longer have any legal effect.
Consequently, their continued inclusion in the Code of Federal
Regulations might lead to public confusion. Further, as discussed
above, as a result of the elimination of Exchange Act section 17(i)
under section 617 of the Dodd-Frank Act, no broker-dealers are
affiliated with an SIBHC and, therefore, no broker-dealers can rely on
the provisions in the risk assessment rules that exempt a broker-dealer
affiliated with an SIBHC from those rules. Moreover, because the Dodd-
Frank Act eliminated section 17(i), no firms affiliated with a broker-
dealer can elect to be supervised by the Commission as an SIBHC.
Because no broker-dealers currently, or will in the future, rely on the
exemptions in the risk assessment rules available to broker-dealers
affiliated with an SIBHC, the Commission finds that notice and
solicitation of comment is unnecessary with respect to the rescission
of these exemptions. The Commission also finds that notice and
solicitation of comment is unnecessary with respect the delegation of
authority rules that the Commission is rescinding in this release
because the rescinded aspects of those rules pertain to rules under the
SIBHC program that no longer have legal effect and will no longer
exist. Further, the Commission notes that notice and
[[Page 42865]]
comment is not required with regard to the delegations of authority
because they relate solely to Commission organization, procedure, or
practice.\19\
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\18\ This finding also satisfies the requirements of 5 U.S.C.
808(2), allowing the rule amendments to become effective
notwithstanding the requirements of 5 U.S.C. 801 (if a Federal
agency finds that notice and public comment are ``impracticable,
unnecessary, or contrary to the public interest,'' a rule ``shall
take effect at such time as the Federal agency promulgating the rule
determines''). Because the Commission is not publishing the rule
amendments in a notice of proposed rulemaking, no analysis is
required under the Regulatory Flexibility Act. See 5 U.S.C. 601(2)
(for purposes of Regulatory Flexibility Analysis, the term ``rule''
means any rule for which the agency publishes a general notice of
proposed rulemaking).
\19\ See 5 U.S.C. 553(b).
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Section 23(a)(2) of the Exchange Act requires the Commission to
consider the competitive effects of rulemaking under the Exchange
Act.\20\ Further, section 3(f) of the Exchange Act requires the
Commission, when engaging in rulemaking where it is required to
consider or determine whether an action is necessary or appropriate in
the public interest, to consider, in addition to the protection of
investors, whether the action will promote efficiency, competition, and
capital formation.\21\ Rescinding the rules related to the SIBHC
program will not create any competitive advantages or disadvantages, or
affect efficiency, competition, and capital formation because the
Commission is merely rescinding rules that no longer have any legal
effect.
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\20\ 15 U.S.C. 78w(a)(2).
\21\ 15 U.S.C. 78c(f).
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III. Paperwork Reduction Act
Certain provisions of Rules 17i-1 through 17i-8 contained
``collection of information'' requirements within the meaning of the
Paperwork Reduction Act of 1995 (``PRA'').\22\ Consequently, the
Commission submitted these collections of information to the Office of
Management and Budget (``OMB'') for review in accordance with 44 U.S.C.
3507(d) and 5 CFR 1320.11.
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\22\ 44 U.S.C. 3501 et seq.
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The titles for the collections of information are: (i) Rule 17i-2
Notice of Intention to be Supervised by the Commission as a Supervised
Investment Bank Holding Company; (ii) Rule 17i-3 Withdrawal from
Supervision as a Supervised Investment Bank Holding Company; (iii) Rule
17i-4 Internal Risk Management Control Systems Requirements for
Supervised Investment Bank Holding Companies; (iv) Rule 17i-5 Record
Creation, Maintenance, and Access Requirements for Supervised
Investment Bank Holding Companies; (v) Rule 17i-6 Reporting
Requirements for Supervised Investment Bank Holding Companies; and (vi)
Rule 17i-8 Notification Requirements for Supervised Investment Bank
Holding Companies. OMB approved these collections of information and
assigned them OMB Control Nos. 3235-0592, 3235-0593, 3235-0594, 3235-
0590, 3235-0588, and 3235-0591, respectively.
As noted above, the rules promulgated under section 17(i)
established a framework pursuant to which an investment bank holding
company could elect to become supervised by the Commission as an SIBHC,
as well as recordkeeping and reporting requirements for SIBHCs. Because
the Commission is rescinding this regulatory framework, the Commission
has discontinued the OMB collections of information associated with it.
As discussed above, to eliminate duplicative recordkeeping and
reporting requirements, broker-dealers affiliated with an SIBHC were
exempt from Rules 17h-1T and 17h-2T. Any broker-dealer previously
relying on the SIBHC exemptions in Rules 17h-1T and 17h-2T (and thus
required to comply with Rules 17i-1 through 17i-8) has, since July 21,
2011, been required to comply with Rules 17h-1T and 17h-2T. One broker-
dealer that elected to use the SIBHC rules now is required to comply
with Rules 17h-1T and 17h-2T. The Commission has accounted for this
increased burden in connection with the recent notice seeking comment
on the existing collection of information provided for in Rules 17h-1T
and 17h-2T.\23\
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\23\ See Proposed Collection; Comment Request, 77 FR 31408 (May
25, 2012).
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IV. Statutory Authority and Text of Amendments
The Commission is removing regulations pursuant to authority
provided by section 23(a) of the Exchange Act.
List of Subjects
17 CFR Part 200
Administrative practice and procedure; Authority delegations
(Government agencies).
17 CFR Part 240
Brokers; Reporting and recordkeeping requirements; Securities.
Text of Amendments
For the reasons set out in the preamble, Title 17, Chapter II of
the Code of Federal Regulations is amended as follows:
PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND
REQUESTS
Subpart A--Organization and Program Management
0
1. The authority citation for Part 200, Subpart A, continues to read,
in part, as follows:
Authority: 15 U.S.C. 77o, 77s, 77sss, 78d, 78d-1, 78d-2, 78w,
78ll(d), 78mm, 80a-37, 80b-11, and 7202, unless otherwise noted.
Sec. 200.30-3 [Amended]
0
2. Section 200.30-3 is amended by removing and reserving paragraphs
(a)(77), (a)(78), and (a)(79).
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
0
3. The authority citation for Part 240 continues to read, in part, as
follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78d, 78e, 78f, 78g,
78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 78p,
78q, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-
37, 80b-3, 80b-4, 80b-11, and 7201 et seq.; and 18 U.S.C. 1350, 12
U.S.C. 5221(e)(3), and sec. 939A, Pub. L. 111-203, 124 Stat. 1376,
(2010), unless otherwise noted.
Sec. 240.17h-1T [Amended]
0
4. Section 240.17h-1T is amended by:
0
a. Removing paragraph (d)(5); and
0
b. Redesignating paragraph (d)(6) as paragraph (d)(5).
Sec. 240.17h-2T [Amended]
0
5. Section 240.17h-2T is amended by:
0
a. Removing paragraph (b)(5); and
0
b. Redesignating paragraph (b)(6) as paragraph (b)(5).
Sec. Sec. 240.17i-1--240.17i-8 [Removed]
0
6. Sections 240.17i-1 through 240.17i-8 are removed, including the
heading, ``Supervised Investment Bank Holding Company Rules,'' and the
Preliminary Note preceding those sections.
By the Commission.
Dated: July 12, 2013.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-17194 Filed 7-17-13; 8:45 am]
BILLING CODE 8011-01-P