Securities Holding Companies – Registration Rules Proposed by Federal Reserve


This past Friday, the Federal Reserve Board (“FRB”) proposed a new Regulation OO for the registration of companies that control registered brokers or dealers as securities holding companies (“SHCs”).1 Registration would not be required or necessary for companies that are already supervised on a consolidated basis by the FRB. The proposal itself is procedural, but it would require a detailed submission. The FRB projects that five companies are likely to register. FRB supervision of these companies will be comprehensive, and the enhanced prudential standards for systemically important financial institutions are likely to influence this supervision. Now would be the time for potential registrants to assess the impact of FRB oversight.

Section 618 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) establishes a new regime at the FRB for the supervision of SHCs.2 The program is available only for those SHCs that are not nonbank financial companies that have been designated as systemically important by the Financial Stability Oversight Council, an insured bank or savings association or an affiliate of one, a foreign banking organization, a foreign bank that controls an Edge Act corporation, or any company subject to comprehensive consolidated regulation by a foreign supervisory.

Entry into the program technically is not automatic or required. Rather, it is available for SHCs that are required by a foreign regulator or a provision of foreign law to be subject to comprehensive consolidated supervision. Registration is the only realistic option in the event of such a requirement. The FRB anticipates that five companies will register for the SHC supervision program.

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