House Panel to Weigh Bill that Would Simplify Securities Issuance by Bank Holding Companies

WASHINGTON - capital markets would free bank holding companies from the tangled web of state and federal securities regulations The telecommunications and finance subcommmittee of the House Commerce Committee will gather industry testimony Nov. 14 on the proposed Capital Markets Deregulation and Liberalization Act. The panel canceled a hearing on the bill last week. The measure, sponsored by the subcommittee's chairman, Rep. Jack Fields, R-Tex., would replace most state securities regulations with a uniform set of federal laws. The bill would cut the cost of issuing securities for bank holding companies, allow banks to lend more on securities purchases, and limit broker-dealers' liability for investment recommendations. The legislation is being supported by securities companies, but the American Bankers Association has not yet taken a position. However, Sarah A. Miller, the ABA's senior government-relations counsel, said the bill would significantly cut compliance costs for bank holding companies, which often issue stocks and bonds to raise capital in more than one state. "It costs a lot when you have to register securities in such a way that you comply with the rules of every state while complying with regulations at the federal level as well," Ms. Miller said. "Anything that streamlines the regulation of capital raising activities would benefit us," she added. The legislation also would loosen the restrictions faced by lenders who extend credit to their customers to purchase securities. The Federal Reserve Board would be given the authority to change the margin between the loan and the actual market value of the securities purchased whenever it deems it necessary. The ABA took issue with a provision in the bill that would repeal the Trust Indenture Act of 1939. That law requires a contract to be filed with the Securities and Exchange Commission outlining the responsibilities of the bond issuer, the trustee, and the shareholders in debt issues. As trustees, banks act as middlemen between debt issuers and investors, safeguarding investors' interests and passing along dividends. "The act is used as a guide and a standard of conduct," Ms. Miller said. "Getting rid of it may undermine investor confidence." Finally, the bill would mandate that broker-dealers are only responsible for the investment decisions of institutional investors if there is a prior written agreement to that effect. Institutional investors are defined as those with portfolios of least $10 million. Conflicts between state and federal securities laws are especially tough on mutual funds, according to Investment Company Institute president Matthew P. Fink.