Today, June 4, 2012, the Federal Reserve Board (the “Board”) published new Regulation OO for companies that control U.S. registered brokers or dealers to register with the Board as supervised securities holding companies (“SSHCs”). Supervision by the Board will enable these companies to satisfy any requirements of foreign regulators that they be subject to comprehensive consolidated supervision (“CCS”). Registration with the Board is not required. Regulation OO itself is entirely procedural in nature, but supervision by the Board will have important consequences relating to the extent of Board supervision, capital requirements, and the possible application of the Volcker Rule.

The SSHC Program

Section 618 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) establishes the new regime for the supervision by the Board of those broker dealer holding companies that are subject to a CCS requirement from a foreign regulator. The program seems likely to reach a small population of broker-dealer organizations. Many of the largest broker-dealers are subsidiaries of companies already regulated by the Board as bank holding companies. Other broker-dealers in the United States are owned by foreign banks and are ineligible for the program. Additionally, a large broker-dealer could in the future be designated as systemically important by the Financial Stability Oversight Council and therefore not be subject to this particular program. The Board has identified five companies with a foreign presence that might trigger a CCS requirement, but also notes that only one such institution has expressed interest.