In creating two committees for its bank-affiliated members, the Securities Industry Association may have achieved detente with a constituency that was once its sworn enemy.
Throughout the 1980s, the association lobbed lawsuits at federal banking regulators as they gradually expanded banks' securities powers in areas including discount brokerage, investment advisory, and securitizing mortgage loans.
But in the 1990s, as banks have established themselves in securities underwriting and sales, more and more have moved into the association's sphere of influence. Banking companies have been big buyers of securities firms that belong to the association. For instance, McDonald & Co. is now owned by KeyCorp and Piper Jaffray by U.S. Bancorp.
"The members have expressed the need to focus more services looking at the intersection of banking and securities," said Alan E. Sorcher, the trade group's assistant general counsel.
Though financial reform is still winding its way through Congress, "modernization has been going on without the legislation," added Mr. Sorcher, who is staff adviser to the committees.
Thus the announcement this week that the trade group was forming panels to address the increasingly complicated compliance requirements faced by broker-dealers owned by banking companies.
The Bank Securities Regulatory Committee and Bank Retail Broker/Dealer Regulatory Committee will hold their first meetings in the last week of May. Each panel consists of 20 lawyers and compliance officers from member firms.
The capital markets committee chairman is Robert C. Dinerstein, managing director and general counsel of UBS' Warburg Dillon Read. The chairwoman of the retail brokerage committee is Deborah H. Kaye, vice president and assistant general counsel at Chase Manhattan Bank.
The committees' members come from brokerage operations that were both bought, such as NationsBanc Montgomery Securities, or built, such as Amsouth Investment Services, by banking companies. Either way, banks and brokerages face a myriad of additional regulation by expanding into each other's business.
As banking and securities companies merge, their sheer scale is attracting more regulatory attention, said Luciano Moschetta, vice president and chief compliance officer for Quick & Reilly and Fleet Securities Inc. "That's kind of the nightmare and that's what a lot of us have to live with right now."
The convergence is also having a practical impact. For instance, many broker-dealers didn't formalize their market and credit risk management practices until they came under bank regulation, he said.
"If we have to do something because the Fed requires it, there are some spill-over benefits for the securities regulators," he said.
There should not be much overlap on the retail side between the Securities Industry Association panels and the ABA Securities Association. The newly created panels address both the wholesale and retail sides, while the ABA group is focused on the wholesale side, said Rachel Robbins, its chairwoman.
But Ms. Robbins, who is also managing director and general counsel of J.P. Morgan & Co., did express some concern about the effect another advocate could have on a crowded field.
"It's important to make sure when we add another voice that we don't fracture the unity that the industry has achieved," she said.
