What is a Broker-Dealer? - Davis Polk & Wardwell
What is a Broker-Dealer? - Davis Polk & Wardwell
What is a Broker-Dealer? - Davis Polk & Wardwell
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(and foreign securities exchanges) would be permitted to do business<br />
in the United States on the bas<strong>is</strong> of home country rules, rather than<br />
the U.S. regulatory regime. On March 24, 2008, the SEC announced<br />
that, among other measures, it would explore the possibility of a<br />
limited mutual recognition arrangement with one or more foreign<br />
regulatory counterparts, and that those arrangements could provide<br />
the bas<strong>is</strong> for the development of a more general approach to mutual<br />
recognition through rulemaking. 404 Since then, the SEC has held<br />
d<strong>is</strong>cussions with Canada, Australia and the European Union. On<br />
May 29, 2008, the SEC and its Canadian counterpart announced<br />
the schedule for completion of a U.S.-Canadian mutual recognition<br />
process agreement. 405 On August 26, 2008, the SEC and its Australian<br />
counterpart signed a mutual recognition agreement. 406<br />
The Dodd-Frank Act requires that “security-based swap dealers”<br />
reg<strong>is</strong>ter with the SEC and remain subject to a host of regulatory<br />
requirements. There <strong>is</strong> no exemption in Dodd-Frank similar to Rule<br />
15a-6 that would allow foreign security-based swap dealers to avoid<br />
reg<strong>is</strong>tration under the Act.<br />
§ 1A:7.4 Banks<br />
<strong>What</strong> Is a <strong>Broker</strong>-<strong>Dealer</strong>? § 1A:7.4<br />
[A] Pre-GLBA Background<br />
Prior to the adoption and implementation of the GLBA, banks had<br />
a blanket exemption from the Exchange Act’s definitions of “broker”<br />
and “dealer.” Thus, banks could conduct any securities activity perm<strong>is</strong>sible<br />
under the banking laws without having to reg<strong>is</strong>ter as brokers<br />
or dealers. Among other things, the GLBA amended sections (a)(4) and<br />
(a)(5) of the Exchange Act by replacing the blanket exemption for<br />
banks from broker-dealer reg<strong>is</strong>tration requirements with specific exemptions<br />
for designated traditional bank securities activities. These<br />
are colloquially referred to as the “push-out” prov<strong>is</strong>ions. 407 The SEC<br />
later adopted rules implementing the “push-out” prov<strong>is</strong>ions.<br />
404. Press Release, SEC, SEC Announces Next Steps for Implementation of<br />
Mutual Recognition Concept (Mar. 24, 2008), available at www.sec.gov/<br />
news/press/2008/2008-49.htm.<br />
405. Press Release, SEC, Schedule Announced for Completion of U.S.-<br />
Canadian Mutual Recognition Process Agreement (May 29, 2008),<br />
available at www.sec.gov/news/press/2008/2008-98.htm.<br />
406. Press Release, SEC, Australian Authorities Sign Mutual Recognition<br />
Agreement (Aug. 26, 2008), available at www.sec.gov/news/press/2008/<br />
2008-182.htm.<br />
407. The origin of th<strong>is</strong> term relates to the fact that, upon the GLBA’s elimination<br />
of banks’ h<strong>is</strong>toric exemption from regulation as broker-dealers, it<br />
would have been impractical for a bank itself to reg<strong>is</strong>ter as a broker-dealer.<br />
Therefore, many of the securities activities traditionally conducted by<br />
banks would be “pushed-out” into an affiliated securities firm.<br />
(<strong>Broker</strong>-<strong>Dealer</strong> Reg., Rel. #9, 9/10)<br />
1A–93