TUCSON, Ariz. - Despite the rush of applicants taking advantage of the Gramm-Leach-Bliley Act, a former regulator said over the weekend that the new law has little to offer most banks - particularly small ones.

Robert M. Kurucza, general counsel of the Bank Securities Association, said Sunday at the trade group's annual convention here that "a substantial number" of the 100-plus organizations asking the Federal Reserve Board to approve them as financial holding companies under the new law do not need to do so unless they plan to underwrite insurance or enter merchant banking.

"There will be a bit of a herd mentality" as banks chase the cachet of the new holding company status, said Mr. Kurucza, a partner at Washington law firm of Morrison & Foerster and formerly an investment expert with the Office of the Comptroller of the Currency and the Securities and Exchange Commission.

But many institutions merely want to sell securities or insurance products and could do that under their existing bank holding companies or through direct bank subsidiaries instead of forming a new holding company, he said. Financial holding companies have to meet capital, management, and community reinvestment requirements and are subject to an untested supervisory system that may not outweigh the benefits.

For instance, banks may still operate broker-dealer businesses and advise mutual funds through direct "operating" subsidiaries as they did before the law's enactment in November, he said. He noted that the law lets banks form "financial subsidiaries" to engage in securities underwriting, but that such units are subject to additional regulation.

Some banking executives attending the conference agreed, saying that the law is not prompting them to substantially reorganize their existing securities sales operations.

"We're pretty much already there," said Kathleen Dennis, senior managing director of Key Asset Management Inc., the investment arm of Cleveland-based KeyCorp. But "there will be a lot of impact on smaller banks" that are still determining how to go about entering the business, she said.

According to Mr. Kurucza, many small banks may decide that the regulatory and compliance burdens of entering the securities business are too great and instead look to offer securities through third-party brokers.

"Third-party marketers are going to have a field day with this," he predicted.

Larry L. Graham, president of AFS Brokerage Inc., a third-party marketing firm in Englewood, Colo., agreed. Though many banks have been offering securities for over a decade, it took the financial reform law to raise awareness among other community banks that thought they could continue to prosper without offering securities, Mr. Graham said.

Despite downplaying the impact of the law, Mr. Kurucza acknowledged that financial holding company status could enable companies to enter broader lines of business at a later date. "If you want to be prepared, that's fine," he said. "But the question is why are they doing it."

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