In accordance with Governor Lamont's emergency declaration, employees and the public are asked to observe social distancing measures to ensure communal safety and to slow the spread of the novel coronavirus (COVID-19). People are asked to work from home and telecommute wherever possible. Adhering to these instructions, the Department of Banking has closed its offices to the public. However, agency staff will continue to provide services to consumers and industry through telework. When contacting the Department, please use electronic communication whenever possible. Agency staff will continue to check voicemails during this time. Consumers are encouraged to use our online form for complaints. If you are unsure where to send an inquiry, you may send it to Department.Banking@ct.gov and it will be routed appropriately. Thank you for your patience during this time.

Editorial NoteSuperseded by the adoption of Federal Reserve System Regulation R (12 CFR Part 218); SEC Release  No. 34-56501 (Definitions of Terms and Exemptions Relating to the "Broker" Exceptions for Banks); and SEC Release No. 34-56502 (Exemptions for Banks Under Section 3(a)(5) of the Securities Exchange Act of 1934 and Related Rules)


Order Excluding Banks From the Definition of "Broker-Dealer" Under Section 36b-3(5) of the Connecticut Uniform Securities Act Until the Effective Date of Final Rules Issued by the Securities and Exchange Commission Providing Definition and Exemptions From the Definitions of "Broker" and "Dealer" Under the Securities Exchange Act of 1934


WHEREAS
the Commissioner of Banking ("Commissioner") is charged with administering Chapter 672a of the Connecticut General Statutes, the Connecticut Uniform Securities Act ("Act") and Sections 36b-31-2 et seq. of the Regulations of Connecticut State Agencies ("Regulations") promulgated under the Act;

WHEREAS Section 36b-31(c) of the Act states, in pertinent part, that "[t]o encourage uniform interpretation and administration of sections 36b-2 to 36b-33, inclusive, and effective securities regulation and enforcement, the commissioner may cooperate with . . . the Securities and Exchange Commission . . . . The cooperation authorized by this subsection includes, but is not limited to, the following actions: . . . (5) executing joint agreements, memoranda of understanding and orders";

WHEREAS Section 36b-31(b) of the Act states, in pertinent part, that "[n]o . . . order may be made, amended or rescinded unless the commissioner finds that the action is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of sections 36b-2 to 36b-33, inclusive. In prescribing . . . orders the commissioner may cooperate with the . . . Securities and Exchange Commission with a view to effectuating the policy of said sections to achieve maximum uniformity in the form and content of registration statements, applications and reports wherever practicable";

WHEREAS on November 12, 1999, the federal Gramm-Leach-Bliley Act ("GLBA"), Pub. L. No. 106-102, 113 Stat. 1338 (1999), was signed into law;

WHEREAS GLBA, among other things, amended Sections 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934 ("Exchange Act") to limit the exceptions from the definitions of "broker" and "dealer" for banks, as defined in Section 3(a)(6) of the Exchange Act, conducting certain securities-related activities;

WHEREAS the provisions of GLBA affecting the status of banks as "brokers" and "dealers" carried an original effective date of May 12, 2001;

WHEREAS on May 11, 2001, the Securities and Exchange Commission ("SEC") issued interim final rules under the Exchange Act (Release No. 34-44291; File No. S7-12-01), such rules being denominated as Rules 3a4-2 through 3a4-6, 3a5-1, 3b-17, 3b-18 and 15a-7 through 15a-9 ("Interim Rules");

WHEREAS the Interim Rules clarified certain terms used in Sections 3(a)(4) and 3(a)(5) of the Exchange Act, as amended by GLBA, and provided exemptions for certain banks, savings associations and savings banks pursuant to the authority granted to the SEC by Section 36 of the Exchange Act;

WHEREAS Section 36(a)(1) of the Exchange Act provides that: "[e]xcept as provided in subsection (b), but notwithstanding any other provision of this title, the Commission, by rule, regulation or order, may conditionally or unconditionally exempt any person, security, or transaction, or any . . . class or classes of persons, securities, or transactions, from any provision or provisions of this title or of any rule or regulation thereunder, to the extent that such exemption is necessary or appropriate in the public interst [sic], and is consistent with the protection of investors";

WHEREAS Release No. 34-44291 provided that the Interim Rules were subject to amendment following the close of a comment period;

WHEREAS on July 18, 2001, the SEC issued an Order Extending Temporary Exemption of Banks, Savings Associations, and Savings Banks from the Definitions of "Broker" and "Dealer" Under Sections 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934 ("July 18, 2001 Extension Order") pursuant to Section 36 of the Exchange Act;

WHEREAS the July 18, 2001 Extension Order delayed implementation of the Interim Rules by exempting banks, savings associations and savings banks from the federal definitions of "broker" and "dealer" under the Exchange Act until May 12, 2002;

WHEREAS in entering the July 18, 2001 Extension Order, the SEC found that the July 18, 2001 Extension Order was necessary and appropriate in the public interest and consistent with the protection of investors; that postponed implementation of the Interim Rules would prevent banks from unnecessarily incurring costs to comply with the statutory scheme based on the Interim Rules rather than the rules as amended; and that delayed implementation would give the SEC time to fully consider comments received on the Interim Rules and amend the Interim Rules as necessary;

WHEREAS on May 31, 2001, the Governor signed into law Public Act 01-48 ("P.A. 01-48") which amended the definition of "broker-dealer" in Section 36b-3(5) of the Act to conform the exclusion for banks to that contained in Sections 3(a)(4) and 3(a)(5) of the Exchange Act, as amended by GLBA;

WHEREAS P.A. 01-48 takes effect October 1, 2001;

WHEREAS Section 36b-3(5) of the Act, as amended by P.A. 01-48, states, in part, that the term "broker-dealer" means "any person engaged in the business of effecting transactions in securities for the account of others or for such person's own account. 'Broker-dealer' does not include . . . (C) a bank, as defined in Section 3(a)(6) of the Securities Exchange Act of 1934, when conducting activities that would except it from the definitions of 'broker' or 'dealer' under Sections 3(a)(4) or 3(a)(5) of the Securities Exchange Act of 1934 . . .";

WHEREAS the temporary nature of the Interim Rules and the conflict in implementation dates created by the July 18, 2001 Extension Order and P.A. 01-48 would undermine the uniform treatment of banks as "broker-dealers", increase the risk of inconsistent interpretations at the state and federal levels and create an unwarranted compliance burden;

AND WHEREAS the Commissioner finds that the entry of this Order, which recognizes the need for state and federal uniformity, is necessary and appropriate in the public interest and consistent with the purposes fairly intended by the policy and provisions of the Act".

NOW THEREFORE, THE COMMISSIONER ORDERS AS FOLLOWS:

(1) Banks, as defined in Section 3(a)(6) of the Exchange Act, shall be excluded from the definition of "broker-dealer" under Section 36b-3(5) of the Act, as amended, until the effective date of any final rule or rules issued by the SEC defining the terms in, and providing specific exemptions from, the definitions of "broker" and "dealer" under Sections 3(a)(4) and 3(a)(5) of the Exchange Act;
(2) This Order shall be effective on October 1, 2001; and
(3) This Order shall remain in effect until superseded, modified, withdrawn or vacated by the Commissioner or other legal authority.
So ordered at Hartford, Connecticut
this 26th day of September 2001.
John P. Burke
Banking Commissioner

Licensing Information