WASHINGTON - Under withering assault from the banking industry and its regulators, the Securities and Exchange Commission on Wednesday backed off an interim rule to implement the broker-dealer provisions of the Gramm-Leach-Bliley Act.
Acting SEC Commissioner Laura S. Unger said in a speech before the Exchequer Club that the agency will reopen the rule for comment until Sept. 4 and postpone the rule's effective date more than seven months, to May 12.
She said the agency will consider amending the controversial proposal. "We intend to give banks a very reasonably long period of time to come into compliance with whatever the final rules are."
The rule implements the section of the Gramm-Leach-Bliley that puts limits on the types of securities transactions a bank may execute without being registered as a broker-dealer. The law includes more than a dozen exemptions for activities that have long been conducted in banks.
The SEC issued its interim rule May 18, prompting a storm of negative comment from bankers and regulators, who claimed that it ignored many of those exemptions or made them meaningless.
Ms. Unger's speech was interrupted by cheering from banking industry lobbyists after she admitted, "We don't understand your business as well as you do" and expressed a willingness to work with the industry to amend the rule.
"It is a great olive branch," said Beth L. Climo, executive director for the American Bankers Association Securities Association. "This is a huge first step, because one of the most difficult things for the industry was having to comply with something in a short period of time that we all believe needs to be substantially changed."
"The rules as drafted are full of complexities and administrative procedures going far beyond the statutory language," said Steve Bartlett, president of the Financial Services Roundtable. "We applaud the SEC for being aware of and listening to our very real concerns."
The agency's announcement came a day after House Financial Services Committee Chairman Michael G. Oxley, R-Ohio, said the proposal goes beyond what Congress intended. "The SEC staff is apparently taking steroids on this whole thing," he remarked. The panel's capital markets and financial institutions subcommittees has planned a joint hearing for Aug. 2 to get testimony about the rule.
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