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Federal R eserve Bank OF DALLAS ROBERT D. M c T E E R , J R . DALLAS, TEXAS p re s id e n t A N D C H IE F E X E C U T I V E O F F I C E R ^ February 5, 1997 7 5 2 6 5 -5 9 0 6 Notice 97-12 TO: The Chief Executive Officer of each financial institution and others concerned in the Eleventh Federal Reserve District SUBJECT Proposal to Adopt Qualification Requirements for Transactions in Certain Securities DETAILS The Board of Governors of the Federal Reserve System, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency (banking agencies), is requesting public comment on proposed regulations regarding qualification requirements for bank employees who sell mutual funds and certain other securities. The proposed regulations would promote the safe and sound operation of bank retail securities sales programs and customer protection by establishing standardized qualification require ments for bank personnel engaged in the retail sale of certain securities. In addition, the banking agencies are proposing to adopt four forms to be used in connection with the regulation: Form SB (Uniform Notice for Sponsoring Bank), Form SBW (Uniform Notice for Sponsoring Bank Withdrawal), Form U-4B (Uniform Application for Bank Securities Representative Registration or Transfer), and Form U-5B (Uniform Termina tion Notice for Bank Securities Representative Registration). The proposed forms are based on the uniform forms used in the securities industry for broker-dealers and their registered representatives. The use of these forms, along with the proposed regulation, will promote the safe and sound operation of bank retail securities sales programs and customer protection by standardizing the qualification requirements of bank personnel engaged in the retail sale of certain securities. The Board must receive comments by February 28, 1997. Please address com ments to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, D.C. 20551. All comments should refer to Docket No. R-0950. For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333 -4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) ATTACHMENT A copy of the Board’s notice as it appears on pages 68823-42, Vol. 61, No. 251, of the Federal Register dated December 30, 1996, is attached. MORE INFORMATION For more information, please contact Daniel Kirkland at (214) 922-6256. For additional copies of this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254. Sincerely yours, Monday December 30, 1996 Part II Department of the Treasury Comptroller of the Currency 12 CFR Part 12 Federal Reserve System 12 CFR Parts 208 and 211 Federal Deposit Insurance Corporation 12 CFR Part 342 Qualification Requirements for Transactions in Certain Securities, Proposed Rule and Proposed Information Collection Comment Request; Notice 68823 68824 Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12 CFR Part 12 [Docket No. 96-29] RIN 1557-AB42 FEDERAL RESERVE SYSTEM 12 CFR Parts 208 and 211 [Docket No. R-0950] FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 342 RIN 3064-AB85 Qualification Requirements for Transactions in Certain Securities AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of Governors of the Federal Reserve System; Federal Deposit Insurance Corporation. ACTION: Joint notice of proposed rulemaking. The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC) (banking agencies) propose to adopt a qualification regulation for those banks that engage in bank-direct retail sales or recom m endations of certain securities through their employees. Because banks are not required to register as a brokerdealer u nder the Securities Exchange Act of 1934, as am ended, 15 U.S.C. 78 et seq. (Securities Exchange Act), the proposed regulation establishes requirem ents for banks and bank securities representatives that are consistent w ith the professional qualification requirem ents for brokerdealers and registered representatives u n d er the Securities Exchange Act and rules thereunder and the rules of the securities self regulatory organizations (SSROs). The banking agencies invite com m ent on all aspects of the proposal as w ell as on the specific issues identified in the “ Section-by-Section Sum mary and Request for Com m ent.” In a separate docum ent published elsew here in this separate part of the Federal Register as a com panion Notice of Forms, the banking agencies are proposing to adopt four forms to be used in connection w ith the regulation; Form SB (Uniform Notice for Sponsoring Bank), Form SBW (Uniform Notice for Sponsoring Bank W ithdrawal), Form SUMMARY: U^IB (Uniform A pplication for Bank Securities Representative Registration or Transfer), and Form U-5B (Uniform Term ination Notice for Bank Securities Representative Registration). The proposed forms are based on the uniform forms used in the securities industry for broker-dealers and their registered representatives. The use of these proposed forms, along w ith this proposed regulation, w ill prom ote the safe and sound operation of bank retail securities sales programs and custom er protection by standardizing the qualification requirem ents of bank personnel engaged in the retail sale of certain securities. DATES: Comments on the proposed regulation m ust be received by February 28, 1997. ADDRESSES: Comments should be directed to: OCC: Com munications Division, Office of the Comptroller of the Currency, 250 E Street, S.W., W ashington DC 20219, Attention: Docket No. 96-29. Comments w ill be available for public inspection and photocopying at the same location. In addition, com m ents may be sent by facsimile transm ission to FAX num ber (202) 874-5274 or by Internet m ail to REGS.COMMENTS@OCC.TREAS.GOV. Board: W illiam W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 20th and Constitution Avenue, N.W., W ashington, D.C. 20551, Attention: Docket No. R-0950, or delivered to room B-2222 of the Eccles Building betw een 8:45 a.m. and 5:15 p.m. Comments may be inspected in room M P-500 betw een 9:00 a.m. and 5:00 p.m. weekdays, except as provided in § 261.8 of the Board of Governors’ rules regarding availability of information, 12 CFR 261.8. FDIC: Jerry L. Langley, Executive Secretary, Attention: Room F-402, Federal Deposit Insurance Corporation, 550 17th Street, N.W., W ashington, D.C. 20429. Comments may be hand delivered to Room F-402, 1776 F Street, N.W., W ashington, DC 20429, on business days betw een 8:30 a.m. and 5:00 p.m. or transm itted by fax or the internet. The FDIC’s fax num ber is (202) 898-3838 and its Internet address is: COMMENTS@FDIC.GOV. Comments w ill be available for inspection and photocopying in Room 100, 801 17th Street, NW, W ashington, DC between 9:00 a.m. and 5:00 p.m. on business days. FOR FURTHER INFORMATION CONTACT: OCC: Joseph W. Malott, Examiner, Capital Markets (202) 874-5070, and Joel Miller, Senior Attorney, Securities and Corporate Practices (202) 874-5210. Board: H oward Amer, A ssistant Director, Division of Banking Supervision and Regulation (202) 45 2 2958, and Angela Desmond, Senior Counsel, Division of Banking Supervision and Regulation (202) 45 2 3497. FDIC: W illiam A. Stark, Assistant Director, Division of Supervision, (202) 898-6972; Lisa D. Arquette, Senior Capital Markets Specialist, Division of Supervision, (202) 898-8633; Ann Hume Loikow, Counsel, Regulations and Legislation Section, Legal Division, (202) 898-3796; and Patrick J. McCarty, Counsel, Regulations and Legislation Section, Legal Division, (202) 898-8708. SUPPLEMENTARY INFORMATION: Background In recent years, sales of securities and other nondeposit investm ent products on bank prem ises have increased as banks have m ade these products available to retail custom ers either directly as b ro k ers1 or through third parties. As this business has evolved, both the banking agencies and the banking industry have identified the need for banks to manage the reputational and legal risks to banks that could result from custom er confusion, to disclose that these investm ent products are not guaranteed by the bank or insured by the FDIC, and to ensure that banks are aware of the application of the antifraud provisions of the Federal securities laws if material m isstatem ents or omissions occur in connection w ith sales of securities on bank premises. These concerns arise w hether the bank is selling directly to custom ers or w hether SEC-regulated broker-dealers are selling on bank prem ises.2 To address these needs, in 1994, the banking agencies and the Office of Thrift Supervision issued the Interagency Statem ent on Retail Sales of N ondeposit Investm ent Products (Interagency Statement), w hich sets forth guidelines for conducting sales of nondeposit investm ent products, consistent w ith principles of safety and 1Banks specifically are excluded from the definition of “broker” in section 3(a)(4) of the Securities Exchange Act, 15 U.S.C. 78c(a)(4), and m ay engage in brokerage transactions w ithout having to register w ith the Securities and Exchange Commission (SEC). 2 It is estim ated that approxim ately 87 percent of all sales of securities on bank prem ises are effected by SEC-regulated broker-dealers. See U.S. General Accounting Office, Report to Congressional Requesters: B ank M utual F unds Sales Practices and Regulatory Issues GAO/GGD-95-210, at p. 52 (September 1995); U.S. General Accounting Office, Report to Congressional Requesters: B anks’ Securities A ctivities— Oversight Differs D epending on A ctivity and Regulator, GAO/GGD-95-214, at p. 25 (Septem ber 1995). Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules soundness and custom er protection.3 Among other things, the Interagency Statem ent provides that banks that engage in the retail recom m endation or sale of securities should provide sales personnel w ith training that is the substantive equivalent of that provided to their securities industry counterparts. Since adoption of the Interagency Statement, industry participants have com m ented that it is difficult to m easure their com pliance w ith the equivalent training requirem ent w hen there are no objective m easures of a bank salesperson’s training comparable to that provided by the securities industry professional qualifications exam inations for broker-dealer sales personnel. To address this issue, the banking agencies approached the SSROs that ow n the exam inations that pertain to the sale of m utual funds 4 and general securities products 5 and requested that the SSROs make the Investm ent Com pany/Variable Contracts Products Limited Representative Qualification Exam ination (Series 6 Examination) and the General Securities Registered Representative Exam ination (Series 7 Examination) available to bank personnel. The SSROs agreed on the condition that the banking agencies adopt regulations establishing registration and qualification requirem ents analogous to those applicable to the securities industry. A doption of a qualifications regulation for banks and their em ployees w ho 2make retail solicitations, recom m endations, purchases, or sales of securities w ill provide a num ber of benefits in addition to ensuring com pliance w ith the equivalent training requirem ents of the Interagency Statement. The regulation w ill ensure that bank sales representatives have adequate product and regulatory knowledge pertaining to those securities being recom m ended and sold at the retail level. This will promote the safe and sound operation of bank- sponsored sales programs and enhance custom er protection. The regulation also w ill enhance the banking 3 5 Fed. Bnkg. L. Rep. (CCH) PP 70-001, et seq.; Federal Reserve Supervisory Letter, SR 94-11 (FIS) (February 17,1994); Federal Reserve Supervisory Letter, 95-46 (SPE) (September 14,1995), interpreting the Interagency Statement; OCC Bulletin 94-13 (Nondeposit Investm ent Sales Exam ination Procedures) (February 24,1994); OCC B ulletin 95-52 (Clarification of Interagency Guidelines) (September 22,1995); FDIC Financial Institutions Letter 9 -9 4 (February 17,1994); and FDIC Financial Institutions Letter 61-95 (September 13,1995). 4 The National Association of Securities Dealers, Inc. (NASD). 5 The NASD, New York Stock Exchange, Inc. (NYSE), and M unicipal Securities Rulemaking Board (MSRB). agencies’ ability to identify and restrict individuals w ho are subject to a statutory disqualification and therefore not qualified u nder the securities laws from soliciting, recom mending, purchasing, or selling securities at the retail level on behalf of banks. Moreover, adoption of the proposed qualification requirem ents is likely to facilitate individuals seeking to move betw een banks and broker-dealers w ithout losing their qualifications to sell certain securities in either industry.6 This w ould create additional efficiencies for banks and securities firms and opportunities for their employees. Accordingly, the banking agencies propose to adopt qualification regulations that establish filing requirem ents for banks and registration, testing, and continuing education requirem ents for bank securities representatives that are analogous to the professional qualification requirem ents for broker-dealers u nder the Securities Exchange Act, and rules thereunder, and the rules of the SSROs. Any filing required to be m ade to a banking agency w ill be m ade at the NASD, w hich w ill m aintain all inform ation in its Central Registration Depository (CRD), the national/state com puter-based registry for broker-dealers and securities personnel. The proposed use of securities industry qualification exam inations and continuing education m aterials w ill not alter the statutory scheme for banks or their brokerage activities. No SSRO, including the NASD, obtains jurisdiction over any sponsoring bank or bank securities representative as a result of the proposed rule or the subm ission of filings to the appropriate Federal banking agency at the NASD. Legal and supervisory authority over banks rem ains vested exclusively w ith the appropriate Federal banking agency. Authority to Issue Regulation This rulem aking is authorized p ursuant to the banking agencies’ statutory authority u nder section 8 of the Federal Deposit Insurance Act (FDIA), 12 U.S.C. 1818, to prevent unsafe and u n sound practices by, and to adopt regulations defining safe and 6 Under current SSRO rules, a bank securities representative seeking to m ove to a broker-dealer m ust request a w aiver from the exam ination requirem ents from h is or her designated SSRO. To the extent a bank securities representative seeks to engage in the recom m endation or sale of m unicipal securities, the MSRB’s 90-day apprenticeship requirem ent applies. See MSRB Rule G— 3(a)(iii). To the extent a bank securities representative seeks to become a candidate for registration w ith an exchange, a training requirem ent m ay be required. See, e.g., NYSE Rule 345.15(2). 68825 sound practices for, banks u nder their respective jurisdictions.7 In addition, the banking agencies have the authority to prescribe specific operational and managerial standards, as deemed appropriate, pursuant to section 3 9 p 1(a)(2) of the FDIA, 12 U.S.C. 83 1 p 1(a)(2). Section-by-Section Summary and Request for Comment D efinitions A ppropriate Qualification Examination. The proposal defines “appropriate qualification exam ination” as the Series 6 Exam ination or the Series 7 Examination, both of w hich are adm inistered by the NASD. The Series 6 Exam ination is the appropriate qualification exam ination for a bank employee engaged solely in covered transactions of open-end investm ent com pany shares, original distribution closed-end investm ent com pany shares, u n it investm ent trusts, or variable contracts, including variable life insurance contracts and variable annuity contracts. The Series 7 Exam ination is the appropriate exam ination for a bank securities representative w ho effects transactions in other securities, such as equities and corporate bonds, in addition to the products covered by the Series 6 Examination. A person w ho passes the Series 7 Examination need not pass the Series 6 Examination. Bank The proposal defines “bank” as each institution regulated by the banking agencies, respectively, b u t does not include affiliates, subsidiaries, or foreign branches of such institutions. (“Foreign branches” located in any Territory of the U nited States, Puerto Rico, Guam, Am erican Samoa, the Trust Territory of the Pacific Islands, or the Virgin Islands, however, are included in the definition of “bank.”) Bank subsidiaries and affiliates engaged in securities sales are already registered w ith the SEC and are subject to the rules and requirem ents of the SEC and SSROs. Bank Securities Representative The proposal defines “bank securities representative” as any bank officer, director, or employee (collectively, employee) who engages in covered transactions or is designated as the supervisor of a bank employee engaged 7 In dependent Bankers A ssociation v. H eim ann, 613 F.2d 1164,1168-69 (D.C. Cir. 1979), cert, denied, 449 U.S. 823; see also National Petroleum Refiners A ssoc, v. FTC, 482 F.2d 672, 680-81 (D.C. Cir. 1973), cert, denied, 415 U.S. 951 (1973). 68826 Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules in covered transactions. Each employee seeking to qualify as a bank securities representative m ust be sponsored by his or h er employing bank. A sponsoring bank m ust file proposed Form U-4B on behalf of its employees. The Form U-4B includes an application for a bank employee to take either the Series 6 or Series 7 Examination. U nder the section captioned “O ptional D esignation as a Bank Securities Representative,” a bank also may choose to have legal, compliance, and audit personnel take a qualification examination. Even though those individuals are not engaged in retail sales or recom m endations of securities, for purposes of this regulation, they w ill be deem ed to be bank securities representatives if they pass a qualification exam ination and w ill be required to com ply w ith all the other provisions of the regulation to m aintain their registration. Continuing Education The proposal defines “continuing education” as the course of study specified in the section captioned “Continuing Education and Training R equirem ents.” These requirem ents correspond to SSRO continuing education requirem ents applicable to registered representatives. Covered Product The proposal defines “covered product” as having the same m eaning as “security” as defined at section 3(a)(10) of the Securities Exchange Act, 15 U.S.C. 78c(a)(10). The definition specifically excludes a government security as defined at section 3(a)(42) of the Securities Exchange Act, 15 U.S.C. 78c(a)(42), because the government securities markets already are subject to a com prehensive statutory and regulatory scheme that addresses the concerns underlying the proposed rule.8 The definition specifically states that deposits, as defined in section 3(1) of the FDIA, 12 U.S.C. 1813(1), are not covered products. Covered Transaction The proposal defines “ covered transaction” as a retail solicitation, recom m endation, purchase, or sale of a covered product by a bank through its employee regardless of the means 8See Section 15C of the Securities Exchange Act, 15 U.S.C. 78o-5, and SEC an d Treasury rules adopted thereunder. In addition, the banking agencies recently issued a notice of proposed rulem aking, titled G overnm ent Securities Sales Practices, that w ould establish standards concerning the recom m endations to customers and the conduct of business by a bank that is a governm ent securities broker or dealer. 61 FR 18470 (April 25, 1996). through w hich the solicitation, recom m endation, purchase, or sale occurs.9 For instance, a transaction that takes place via telephone, mail, or other electronic m eans such as the Internet is included in the definition. Sales personnel in a bank’s dealer departm ent w ho engage in covered transactions (i.e., a retail solicitation, recom m endation, purchase, or sale of securities other than governm ent or m unicipal securities) m ust comply w ith this regulation. The term “covered transaction” does not differentiate betw een those banks that engage in only occasional or a lim ited num ber of covered transactions for a retail customer and those banks that establish programs for the retail sale of covered products. Therefore, consistent w ith the current requirem ents applicable to the securities industry, all banks that engage in covered transactions, regardless of frequency or volume, w ould be considered to be in the business of effecting covered transactions and w ould be required to com ply w ith the regulation.10 Consistent w ith the scope of the Interagency Statement, the term does not include a sale to a fiduciary account adm inistered by a bank, such as statutory and w ritten trust accounts, employee benefit plans, and other types of pension plans norm ally adm inistered by a trust departm ent. Self-directed IRAs, certain types of Keogh accounts, and other accounts w here the customer retains investm ent discretion are, however, included in the term. Sales of m unicipal securities by dealer banks registered under section 15B of the Securities Exchange Act, 15 U.S.C. 78o0044, also are excluded because the bank and its sales personnel already are subject to registration and professional qualifications requirem ents u nder the Securities Exchange Act and the rules of the MSRB. Consistent w ith Rule 3a4— 1 prom ulgated u nder the Securities Exchange Act, 17 CFR 240.3a4-l, equity and debt offerings by banks of their own securities, such as mutual-to-stock conversions, also are excluded from the definition of “covered transaction” if the securities offerings are consistent w ith the conditions set forth in that 9 U nder the Interagency Statem ent, bank em ployees located in the routine deposit taking area are generally prohibited from soliciting or recom m ending nondeposit investm ent products. Such em ployees may, however, direct or refer bank custom ers to bank securities representatives and m ay receive a fee from the bank for such referral. 10The scope of the regulation is in tended to be the same as that for SEC-regulated broker-dealers. If the SEC liberalizes the registration or other professional qualification requirem ents for such broker-dealers, the banking agencies w ill interpret the regulation in a sim ilar manner. Rule.1 These offerings tend to be 1 infrequent and generally are subject to special oversight by the banking agencies. Banks engaged solely in the direct retail sale of their ow n securities are therefore not required to become sponsoring banks. However, if a bank has filed Form SB and becomes a sponsoring bank, it m ust use its bank securities representatives to solicit, recom m end or sell its ow n securities. Disciplinary Action The proposal defines “ disciplinary action” for purposes of this regulation as an action resulting in: (1) an employee being “subject to disqualification;” (2) a civil money penalty or fine of $5,000 or more by the SEC or an SSRO; (3) a civil m oney penalty of $5,000 or more by a banking agency pursuant to 12 U.S.C. 1818 for either a violation of a securities law or regulation, or an unsafe or unsound practice related to a covered transaction; (4) an agreement w ith the SEC, an SSRO, or a banking agency in connection w ith a disciplinary proceeding; or (5) an order by the SEC, an SSRO, or a banking agency to enter the continuing education program. D isciplinary actions m ust be reported on the forms referred to in the com panion Notice of Forms that is being published w ith this proposal. Information on disciplinary actions w ill be available to the public. Bank securities representatives that are subject to a disciplinary action as defined u nder the regulation w ill be subject to additional continuing education requirem ents that begin as of the date of the disciplinary action. The “$5,000 or m ore” figure used in the definition is consistent w ith the threshold used in the definition of “ disciplinary action” in the SSRO rules. NASD The proposal defines “NASD” as the National A ssociation of Securities Dealers, Inc., w hich is an SSRO 11 The bank employee m ust not be subject to a statutory disqualification u n d er the Securities Exchange Act of 1934, m ay n ot receive a com m ission or other rem uneration for selling bank securities, and may not be an associated person of a broker or dealer. In addition, the bank employee m ust restrict his or h er offer and sale activities to certain groups or entities. Further, the bank employee m ust perform prim arily other substantial duties on behalf of the bank, not be an associated person of a broker or dealer w ith in the last 12 m onths or participate in selling an offering of any issuers securities m ore than once every 12 months. Finally, a bank employee m ust restrict h is or her activities to preparing and delivering written com m unications or other m eans w hich do not involve oral solicitations, responding to inquiries initiated by a potential purchaser, and performing m inisterial and clerical work in effecting any transaction. Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules registered u n d er section 15 A of the Securities Exchange Act, 15 U.S.C. 78o, and NASD Regulation, Inc., the regulatory subsidiary of NASD. The NASD w ill accept filings and m aintain in the CRD inform ation filed w ith the banking agencies u nder this regulation. Sponsoring Bank The proposal defines “ sponsoring b ank” as a bank that engages or seeks to engage in the business of effecting covered transactions. A bank th at enters into an agreement w ith a registered broker-dealer enabling registered representatives of the broker-dealer to engage in covered transactions w ith bank customers, regardless of location, is not a “sponsoring bank,” even though the broker-dealer m ay use dual em ployees em ployed by both the bank and the broker-dealer. Subject to Disqualification The proposal defines the term “ subject to disqualification” as having the same m eaning as “statutory disqualification” in section 3(a)(39) of the Securities Exchange Act, 15 U.S.C. 78c(a)(39). Individuals w ho are subject to an order of removal, prohibition, or suspension by a Federal banking agency pursuant to section 8 (e) or (g) of the FDIA, 12 U.S.C. 1818 (e) or (g), or banks or individuals subject to an order or tem porary order pursuant to section 8 (b) or (c) of the FDIA, 12 U.S.C. 1818 (b) or (c), that restricts their fiduciary or securities activities at a depository institution or are subject to a prohibition pursuant to section 19 of the FDIA, 12 U.S.C. 1829(a), are also subject to disqualification. The definition, therefore, makes a bank employee or sponsoring bank subject to disqualification if the employee or bank has been barred, suspended, or enjoined from the banking or securities industries; convicted of any felony in the past 10 years; convicted of a felony or m isdem eanor involving the purchase or sale of a security, or other financial crime (such as theft, robbery, or m isappropriation of funds); or restricted in his or her em ploym ent pursu an t to Section 19(a) of the FDIA, 12 U.S.C. 1829(a). Q ualification Requirem ents Disqualifications The proposal sets forth the qualification requirem ents for both sponsoring banks and bank employees. A bank that is or becomes subject to disqualification shall not engage in a covered transaction unless the appropriate banking agency has granted the bank relief from being subject to disqualification and perm its the bank to engage in covered transactions. This section also prohibits a bank employee w ho is, or becomes, subject to disqualification from engaging in covered transactions unless the em ployee’s sponsoring bank has applied for and obtained the banking agency’s approval for that em ployee to act as a bank securities representative. Sponsoring Bank Notices This section requires a bank seeking to engage in covered sales to file a notice. A bank is required to file a com pleted Form SB 12 w ith the appropriate Federal banking agency at the NASD containing the bank’s name, address, bank identification number, and contact person. Upon receipt of a Form SB, the sponsoring bank w ill be assigned a unique CRD num ber for use on all of the filings required u nder the proposed regulation. Banks that choose to term inate their status as sponsoring banks m ust file the Form SBW w ith the appropriate banking agency at the NASD. Sponsoring Bank Requirements This section requires a bank sponsoring an employee to act as a bank securities representative to ensure that each employee engaged in a covered transaction is not subject to disqualification and has passed the appropriate qualification examination. A sponsoring bank also m ust make independent inquiry regarding the background of each sponsored employee. A sponsoring bank should, at a m inim um , consult the em ployee’s employers from the last three years and should investigate the good character, business repute, qualifications, and experience of any person the bank intends to sponsor. The sponsoring bank also m ust com plete the designated portion of the Form U-4B and file it, along w ith a fingerprint card for the employee w ith the appropriate Federal banking agency at the NASD. The NASD in turn w ill subm it the fingerprint record cards to the Federal Bureau of Investigation for review. A fingerprint card w ill be required each tim e an individual is h ired by a bank to act as a bank securities representative and w ill be used to check w hether the employee has a civil or crim inal record that could subject the individual to disqualification.13 12Form SB, Form SBW, Form U-4B, and Form U 5B are p ublished elsew here in this separate part of the Federal Register contem poraneously w ith the proposed regulation. 13 The securities industry is subject to fingerprinting requirem ents under section 17f of the Securities Exchange Act, 15 U.S.C. 78q(f)(2), and 68827 A bank m ay not sponsor an employee to become a bank securities representative if the individual is “subject to disqualification” unless the bank has applied for and received approval from the appropriate banking agency for the individual to engage in covered transactions. The banking agencies w ill consider, on a case-by-case basis, w hether it is in the public interest to authorize either a sponsoring bank that, or a bank employee who, is, or becomes, subject to disqualification to engage in covered transactions. The banking agencies anticipate they w ill consider factors such as those detailed in SEC Rules of Practice, Rule 193,17 CFR 201.193 (Applications by Barred Individuals for Consent to Associate), in their evaluation of the particular facts and circumstances. The banking agencies seek comm ent on w hether additional factors should be considered for banks and persons w ho are, or become, “subject to disqualification.” The banking agencies may adopt various processes for considering these applications. W ith the exception of those bank em ployees sponsored under the optional designation as a Bank Securities Representative provision, a bank m ay n ot sponsor an employee to become a bank securities representative if the bank does not intend for that individual to engage in the solicitation, recom m endation, purchase, or sale of covered products or to supervise covered transactions. A sponsoring bank is required to file a Form U-5B w hen a bank securities representative ceases to be an employee of the bank for any reason or ceases to engage in covered sales on behalf of the bank. A bank m ust provide a copy of Form U-5B and subsequent am endm ents to the employee. A sponsoring bank is required to designate one or more individuals, as necessary, to supervise the activities of its bank securities representatives. A supervisor designated by a sponsoring bank need n ot engage in covered sales b u t m ust com ply w ith the qualification requirem ents for bank securities representatives. Supervisors m ust take and pass the appropriate qualification exam ination (either the Series 6 or Series 7 Examination) for the bank securities representatives they supervise. The banking agencies request comm ent on w hether supervisors should be required to take one of the securities industry supervisor’s (principal’s) examinations. Commenters Rule 17f-2 prom ulgated thereunder, 15 CFR 240.17f— 2. 68828 Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules are requested to discuss w hether the General Securities P rincipal’s Exam ination (Series 24), w hich focuses on the managem ent of an investm ent banking or securities business, including supervision, solicitation, conduct of business, and training of registered representatives, is relevant or w hether one of the other supervisor’s exam inations (Series 26—Investm ent Com pany Products/Variable Contracts Limited Principal; Series 28— Introducing Broker/Dealer Financial and Operations Principal; or Series 8— General Securities Sales Supervisor Examination, for example) w ould be more appropriate for individuals supervising bank securities representatives w hose activities and product offerings are likely to be more limited. Bank Securities Representative Requirements This section requires a bank employee seeking to qualify as a bank securities representative to com plete designated portions of the Form U-4B and subm it this form and a fingerprint card to his or h er sponsoring bank. The employee th en m ust pass the appropriate qualification exam ination and the sponsoring bank m ust receive approval from the appropriate Federal banking agency prior to the employee engaging in covered transactions. Fingerprint cards and com pleted Forms U-4B m ust be filed for employees transferring registration from another sponsoring bank or securities firm but the employee w ill not have to retake an examination. The Form U-4B requires disclosure of personal and em ploym ent information, including w hether the employee has been the subject of any disciplinary action (as that term is defined in the proposed regulation) or certain types of custom er com plaints involving claims of greater than $5,000 or settlem ents of $10,000 or more. A bank securities representative m ust advise h is or her sponsoring bank w ith in 30 days of an event that renders any inform ation filed on a Form U -4B or U-5B incom plete or inaccurate and m ust cooperate w ith the sponsoring bank in filing an am endm ent to the Form. Any employee w ho fails an exam ination w ill be perm itted to retake the test after a period of 30 days has elapsed from the date of the prior exam ination, except that any employee w ho fails to pass an exam ination three or more tim es in succession (and each additional tim e thereafter) m ust w ait 180 days from the date of the last attem pt before he or she m ay again retake the exam. A bank securities representative w ho has not engaged in covered transactions for a period of two years, or w ho has not supervised a bank sales representative for a period of two years, m ust pass the appropriate exam ination before engaging in covered transactions again. An employee engaged in legal, com pliance, internal audit, or sim ilar responsibilities related to covered transactions w ho has taken an exam ination pursuant to the optional designation provision and w ho does not perform any of those functions for a period of two years also m ust retake the exam ination before engaging in covered transactions. Exam ination Exemptions This section establishes two exemptions from the exam ination requirem ents. First, a bank employee w ho is qualified as a registered representative pursuant to the rules of an SSRO at the time he or she seeks to qualify as a bank securities representative w ill not have to retake the examination. As noted earlier, however, a bank securities representative seeking to transfer em ploym ent from a sponsoring bank to a broker-dealer w ill have to apply to the appropriate SSRO for a w aiver from retaking any exam inations required under applicable SSRO rules and policies. Second, a sponsoring bank m ay apply in writing to its appropriate Federal banking agency on behalf of an employee for a waiver of the exam ination requirem ent. Applications w ill be approved only in exceptional cases w here good cause is shown. In considering these requests, the banking agencies may accept other evidence of an em ployee’s qualifications to act as a bank securities representative. A dvanced age, physical infirmity, or experience in fields ancillary to the investm ent banking or securities business, w ould not individually of them selves constitute sufficient grounds to w aive the exam ination requirem ent. The banking agencies intend to exercise their waiver authority in a m anner consistent w ith the w aiver policies of the SSROs.14 Any bank employee who is eligible for the exam ination exem ption u n d er this paragraph still m ust satisfy all other qualification, reporting and continuing education requirem ents of the regulation. A bank securities representative w ho obtains an exam ination w aiver from a banking agency u nder this section and w ho subsequently seeks to w ork in the securities industry may be required to 14 See, e.g., NASD M em bership and Registration Rule 1070 (Qualification Exam inations and W aiver of Requirements), NASD M anual (CCH), p. 3291. take an exam ination or apply to the appropriate SSRO for a w aiver of that exam ination requirem ent. Approval of Bank Securities Representative A pplications This section prohibits a sponsoring bank from perm itting an employee to act as a bank securities representative until the appropriate banking agency has notified the sponsoring bank that the bank em ployee’s Form U-4B application has been approved. The appropriate banking agency w ill approve the registrations of bank em ployees w hose applications do not disclose grounds for disqualification and who pass the appropriate qualification examination. Registration m ay be revoked if, for example, the fingerprint record identifies any action or item indicating that the individual is subject to disqualification. Grace Period This section establishes a one-year grace period following the adoption of the final rule for banks and bank em ployees to comply w ith the regulation. The grace period w ill perm it banks to file the required notices and arrange for testing and registration of em ployees w ithout un d u ly interrupting bank operations. Any bank that is not in com pliance w ith the rule after the grace period expires m ust cease engaging in covered transactions un til the ru le’s requirem ents are met. Similarly, any individual w ho engages in covered transactions w ho has not com plied w ith all testing and registration requirem ents by the end of the grace period m ust cease all covered transaction activities u n til such requirem ents are met. Filing Requirem ents, A m endm ents, and Record Retention This section requires all filings made w ith the banking agencies u nder the regulation to be m ade at the NASD.15 The NASD ultim ately w ill m aintain this filing inform ation on its CRD, the com puter-based registry for brokerdealers and securities personnel. Information on the CRD w ill be made available to the public on the same basis that the NASD makes information regarding broker-dealers and registered representatives available through its Public Disclosure Program.16 The 15 Filings subm itted by m ail should be sent to the NASD address indicated on the Forms SB, SBW, U 4B and U-5B. W hen the NASD’s CRD becomes available to sponsoring banks, banks w ill either be required to purchase personal com puter software from the NASD to make and access filings directly or w ill be required to utilize a private service bureau or vendor to make electronic filings. 16This inform ation includes disclosure of any investm ent-related consum er-initiated com plaint or Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules banking agencies expect that members of the public w ill be able to inquire about the record of sponsoring banks and bank securities representatives using the NASD’s toll free telephone num ber or other m eans that may become available for CRD inquiries. The NASD charges cost-based fees for processing all filings, adm inistering tests taken by bank employees, processing fingerprint cards, and for access to the CRD. W hile the exact fees the NASD w ill charge sponsoring banks have not yet been established, the banking agencies anticipate that these fees w ill be consistent w ith those levied by the NASD upon broker-dealers for comparable services.17 The NASD may also charge sponsoring banks an initial software m odification fee in order to provide banks access to the CRD. This section also provides that all inform ation subm itted on any filing m ade u nder the regulation m ust be true, current, complete, and not m isleading at the tim e and in light of the circum stances u nder w hich it is reported. A sponsoring bank m ust subm it an am ended filing w ith in 30 days after it learns of any fact or circum stance that causes a filing to be inaccurate or incomplete. This section further establishes record retention requirem ents for filings made under the regulation. A bank m ust retain copies of Forms U-4B and U-5B filed on behalf of any bank employee for at least three years after the employee ceases to act as a bank securities representative or term inates his or her em ploym ent w ith the sponsoring bank. A bank m ust retain copies of Forms SB and SBW and any applications for w aiver of being subject to disqualification for at least three years after it files a Form SBW and term inates covered sales. The banking agencies welcome com m ent regarding the tim ing and content of the proposed filing requirem ents, including the public availability of inform ation regarding sponsoring banks and their bank securities representatives. proceeding that: (1) alleges com pensatory damages of $5,000 or more, fraud, or wrongful taking of property; or (2) w as settled or decided against a sponsoring bank or bank securities representative for $10,000 or more, or found fraud or the wrongful taking of property. See Form U -4 (Uniform Application for S ecurities Industry Registration or Transfer) Q uestion 221. 17 See generally Schedule A (Section 2) to the NASD By-Laws, NASD M anual (CCH), pp. 1101-03. The NASD m ay also levy an initial fee to defray the cost of modifying the CRD database for banks. An additional nom inal fee m ay also be collected by the NASD on behalf of the MSRB to defray the MSRB’s cost of developing questions for the Series 7 Examination. 68829 O ptional Designation as a B ank Securities Representative sponsoring banks that are comparable to requirem ents for broker-dealers. Consistent w ith SSRO rules, a bank m ay choose to sponsor an employee engaged in legal, com pliance, internal audit, or sim ilar responsibilities for covered transactions, or w ho provides adm inistrative support functions for bank securities representatives, to take a qualification exam ination. U nder these circum stances, the employee m ust m eet the registration, testing, reporting, and continuing education requirem ents of a bank securities representative. As long as the individual fills one of the enum erated positions or engages in covered transactions for a sponsoring bank, the em ployee’s registration w ill rem ain active. Bank Securities Representative Requirements A pplications by B anks and B ank Em ployees Subject to D isqualification A bank may file a w ritten application w ith the appropriate banking agency seeking relief from a disqualification on behalf of itself or an employee. The appropriate banking agency may perm it the bank or the employee to engage in covered transactions or act as a bank securities representative if the bank dem onstrates to the banking agency w hy granting relief from a disqualification is consistent w ith safety and soundness, the public interest, and the protection of investors. In cases in w hich a disqualification results from an action brought u nder 12 U.S.C. 1818 or by operation of law u nder 12 U.S.C. 1829, applications for relief m ust be sought pursuant to those sections. Relief granted u nder this section w ill not result in the perm anent elim ination of a disqualification but instead represents approval of a sponsoring bank, or em ploym ent as a bank securities representative w ith the sponsoring bank, u nder specified terms and conditions. For example, if a bank obtains relief for an employee u nder this section and the employee later becomes em ployed by another bank, that bank w ill have to seek relief from disqualification on behalf of the employee and agree to any special terms or conditions im posed by the appropriate Federal banking agency. Any m aterial change in the terms or conditions u n d er w hich relief is granted w ould require the sponsoring bank to seek appropriate relief on behalf of the employee. The first subsection requires a bank securities representative to complete the securities industry’s com puterized training program “Regulatory E lem ent” covering securities regulation issues following the individual’s second, fifth, and tenth anniversaries of passing the appropriate qualification examination. If an SSRO takes a disciplinary action against an individual based upon activities prior to that person becoming a bank securities representative, a banking agency takes a disciplinary action against a bank securities representative, or an individual is otherwise the subject of a disciplinary action, then the bank securities representative m ust take the continuing education training program w ithin 120 days of the occurrence of a disciplinary action and following the second, fifth, and tenth anniversaries of the occurrence of a disciplinary action.18 The proposed regulation requires a bank securities representative w ho does not comply w ith the continuing education requirem ents to cease activities u n til the representative meets the requirements. Sponsoring Bank Requirements The second subsection incorporates the requirem ents of the SSROs’ “Firm Elem ent” and requires sponsoring banks to develop in-house education programs appropriate to the size, structure, scope of products offered, and the b ank’s policies and procedures for covered transactions. These programs should address, at a m inim um , the general investm ent features of the products and services being offered as w ell as associated risk factors, suitability and sales practice considerations, and applicable regulatory requirem ents (including the Interagency Statement). W hile a bank may choose to use commercial training material and outside vendors to assist in meeting this education requirem ent, the bank m ust ensure that the material or program meets the content standards of the proposed rule. C onfidentiality o f Qualification E xam inations Continuing Education and Training Requirem ents This section requires banks and bank em ployees to m aintain the confidentiality of the professional qualification exam inations and not to This section im poses continuing education requirem ents upon bank securities representatives and 18 This is consistent w ith com parable SSRO rules. See, e.g., NASD M em bership and Registration Rule 1120(a)(3), NASD M anual (CCH) pp. 3381-82. 68830 Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules act in a m anner that could compromise the integrity of an examination. Paperwork Reduction Act The banking agencies invite com ment on: (1) W hether the proposed collection of inform ation contained in this notice of proposed rulem aking is necessary for the proper perform ance of each agency’s functions, including w hether the inform ation has practical utility; (2) the accuracy of each agency’s estimate of the b urden of the proposed inform ation collection; (3) ways to enhance the quality, utility, and clarity of the inform ation to be collected; and (4) ways to m inim ize the b u rd en of the inform ation collection on respondents, including through the use of autom ated collection techniques or other forms of inform ation technology. Respondents/recordkeepers are not required to respond to this collection of inform ation unless it displays a currently valid Office of M anagement and Budget (OMB) control number. OCC: The collection of inform ation requirem ents contained in this notice of proposed rulem aking have been subm itted to the OMB for review in accordance w ith the Paperw ork R eduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collections of inform ation should be sent to the Office of Management and Budget, Paperw ork R eduction Project (15570142), W ashington, DC 20503, w ith copies to the Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 250 E Street, SW, W ashington, DC 20219. The collection of inform ation requirem ents in this proposed rule are found in § 12.12 (c)(l)(iii), (c)(3), and (e)(2), § 12.13 (c) and (d), § 12.15, and § 12.16 (a)(4) and (b)(3).19 This inform ation is required to identify national banks as sponsoring banks, to qualify bank employees to take the appropriate qualification examination, and to term inate the status as a sponsoring bank or licensed bank securities representative. The inform ation also is required to evidence com pliance w ith the registration and inform ation collection requirem ents set forth in the proposed regulation. The OCC w ill use the inform ation to m onitor the securities activities in national banks and to assess the qualifications of a national bank employee that wishes to become a bank securities representative. 19 The Paperwork Reduction Act analysis of the required forms appears in the com panion Notice of Forms published by the banking agencies elsewhere in this separate part of the Federal Register. The likely respondents/recordkeepers are national banks. Estim ated average annual burden hours p e r respondent/recordkeeper: 18 hours. Estim ated num ber o f respondents: 120 national banks. Estim ated total annual reporting and recordkeeping burden: 2,184 hours. Start-up costs to respondents: None. Certain records pertaining to the sponsoring b ank’s filings are to be m aintained for the period of time respondent/recordkeeper serves as a sponsoring bank, plus three years thereafter. Records pertaining to bank employees are to be retained for not less th an three years after the employee term inates em ploym ent w ith the sponsoring bank or ceases to act as a bank securities representative. Board: In accordance w ith section 3506 of the Paperw ork R eduction Act of 1995 (44 U.S.C. Ch. 35; see also 5 CFR 1320 A ppendix A Item 1), the Board review ed the proposed rule under the authority delegated to the Board by the Office of M anagement and Budget. Send com ments on the collections of inform ation to: the Office of M anagement and Budget, Paperwork Reduction Project (7100-0282), W ashington DC 20503, w ith copies of such comm ents to be sent to Mary M. McLaughlin, Federal Reserve Board Clearance Officer, Division of Research and Statistics, Mail Stop 97, Board of Governors of the Federal Reserve System, W ashington DC 20551. The requirem ents in this proposed collection of inform ation w ill be included in 12 CFR 208. This inform ation collection is needed to register state m em ber banks (Form SB), to qualify certain bank em ployees to take the appropriate qualification exam ination (Form U-4B), and to term inate the b ank’s status as a registered bank (Form SBW) or the em ployee’s status as a licensed bank securities representative (Form U-5B). The Federal Reserve w ill use the inform ation to m onitor the securities sales activities of state member banks and to assess the qualifications of state m ember bank em ployees to become registered bank securities representatives. This inform ation collection w ill be m andatory. The likely respondents are state member banks. Small businesses w ill not be affected. The Federal Reserve may not conduct or sponsor, and an organization (or a person) is not required to respond to, any collection of inform ation unless it displays a currently valid OMB control num ber. The OMB control num ber for this inform ation collection is 71000282. The reporting b urden im posed by the proposed rule is estim ated to be 18.2 hours per response. It is estim ated that there w ill be 100 respondents/ recordkeepers and a total of 1,820 hours of annual paperw ork burden. This burden represents the tim e needed to complete the four proposed reporting forms: U-4B, U-5B, SB, and SBW. The estim ated burden is averaged over the estim ated num ber of filings during the first three years that the proposed rule w ill be in effect, w ith m ost of the filings presum ed to occur in the first year, as qualification and registration programs are set up, and w ith the burden for the second and third years representing estim ated turnover in registered bank securities representatives. The estim ated b urden is further averaged over the size distribution of the likely respondents. The b urden associated w ith other requirem ents of the proposed rule is discussed in a separate notice published in this issue. FDIC: The collections of information contained in this notice of proposed rulem aking have been subm itted to the Office of M anagement and Budget for review in accordance w ith the Paperw ork R eduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collections of inform ation should be sent to the Office of M anagement and Budget, Paperw ork Reduction Project (1557-0142), W ashington DC 20503, w ith copies of such comm ents to be sent to Steven F. Hanft, Office of the Executive Secretary, Room F-454, Federal Deposit Insurance Corporation, 550 17th Street, N.W., W ashington, DC 20429. The collection of inform ation requirem ents in this proposed rule are found in 12 CFR 342.3(b), 342.3(c) (1) and (3), (e)(2), 342.4(c) and (d), 342.6 and 342.7. The collections consist of notice filings for the Sponsoring Bank as wells as registration applications on behalf of the Bank Securities Representative, 342.3 (b) and (c); exam ination exem ption requests, 342.3(e); required am endm ents to Sponsoring Bank notices and Bank Securities Representative registrations, 342.4(c); records w hich the Sponsoring Bank m ust retain w ith respect to notice filings, Bank Securities Representative registrations, applications for relief from being “subject to disqualification,” and any am endm ents or other filings subm itted, 342.4(d); applications by Sponsoring Banks for relief for itself or a Bank Securities Representative, from being “ subject to disqualification,” 342.6; and continuing education training programs by Sponsoring Banks and attendance/com pliance by Bank Securities Representatives w ith respect Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules to such continuing education requirem ents, 342.7. The likely respondents/recordkeepers are insured nonm em ber banks. Estim ated average annual burden hours per respondent/recordkeeper: 18 hours. E stim ated num ber o f respondents and/or recordkeepers: 70 state nonm em ber banks. E stim ated total annual reporting and recordkeeping burden: 1260 hours. Start-up costs to respondents: None. Records are to be m aintained for the period of tim e respondent/recordkeeper serves as a sponsoring bank. Regulatory Flexibility Act Pursuant to section 605(b) of the Regulatory Flexibility Act (RFA) (5 U.S.C. 605(b)), the initial regulatory flexibility analysis otherwise required u nder section 603 of the RFA (5 U.S.C. 603) is not required if the head of the agency certifies that the rule w ill not have a significant economic im pact on a substantial num ber of small entities and the agency publishes such certification and a succinct statem ent explaining the reasons for such certification in the Federal Register along w ith its general notice of proposed rulemaking. The banking agencies hereby certify that the proposal w ill not have a significant economic im pact on a substantial num ber of small entities. The proposal should result in a net benefit to all banks regardless of size that elect to engage in securities activities through licensed bank securities representatives, b ut the economic im pact on small banks w ill not be significant. Most banks w ith total assets of u nder $100 m illion w ill not engage in securities activities in a m anner covered by this regulation. Rather, a small bank typically w ill use either a registered broker/dealer who has rented space on the b ank’s premises or an “introducing broker” w ho will refer a custom er to a dealer that can effect the desired transaction. The few banks w ith total assets u nder $100 m illion that choose to have employees licensed u nder the proposal w ill incur costs associated w ith the securities activities. However, a bank w ill incur these costs only if it elects to engage in securities activities through bank securities representatives. Executive Order 12866 The OCC has determ ined that this proposal is not a significant regulatory action as defined in Executive Order 12866. Unfunded Mandates Reform Act of 1995 Section 202 of the U nfunded M andates Reform Act of 1995, Pub. L. 104— 109 Stat. 48 (1995) (Unfunded 4, M andates Act), requires that covered agencies prepare a budgetary im pact statem ent before promulgating a rule that includes any Federal m andate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 m illion or more in any one year. If a budgetary im pact statem ent is required, section 205 of the U nfunded Mandates Act also requires covered agencies to identify and consider a reasonable num ber of regulatory alternatives before promulgating a rule. The OCC has determ ined that the proposal will not result in expenditures by State, local, and tribal governments, or by the private sector, of more than $100 m illion in any one year. Accordingly, the OCC has not prepared a budgetary im pact statem ent or specifically addressed the regulatory alternatives considered. List of Subjects 12 CFR Part 12 68831 PART 12— RECORDKEEPING AND CONFIRMATION REQUIREMENTS FOR SECURITIES TRANSACTIONS; QUALIFICATION REQUIREMENTS FOR TRANSACTIONS IN CERTAIN SECURITIES 1. The part heading is revised to read as set forth above. la . The authority citation for part 12 is revised to read as follows: Authority: 12 U.S.C. 24, 92a, 93a, 1818, and 1831p-l(a)(2). 2. Sections 12.1 through 12.7 are designed as subpart A and a new subpart heading is added to read as follows: Subpart A— Recordkeeping and Confirmation Requirements for Securities Transactions 3. In the first line of § 12.1(a), the w ord “p art” is changed to “subpart.” 4. In the introductory text to § 12.2, the w ord “p art” is changed to “ subpart.” 5. In the introductory text to § 12.7, the w ord “p art” is changed to “subpart.” 6. A new subpart B, consisting of §§ 12.10 through 12.17, is added to read as follows: National banks, Reporting and recordkeeping requirem ents, Securities. Subpart B— Qualification Requirements for Transactions in Certain Securities 12 CFR Part 208 Sec. Accounting, Agriculture, Banks, banking, Confidential business information, Crime, Currency, Federal Reserve System, Mortgages, Reporting and recordkeeping requirem ents, Securities. 12.10 Scope. 12.11 Definitions. 12.12 Qualification requirements. 12.13 Filing requirements, amendments, and record retention. 12.14 Optional designation as a bank securities representative. 12.15 Applications by banks and bank employees “subject to disqualification.” 12.16 Continuing education and training requirements. 12.17 Confidentiality of qualification examinations. 12 CFR Part 211 Exports, Federal Reserve System, Foreign banking, Holding companies, Investments, Reporting and recordkeeping requirements. 12 CFR Part 342 Banks, banking, Reporting and recordkeeping requirem ents, Securities. Office of the Comptroller of the Currency 12 CFR Chapter I Authority and Issuance For the reasons set forth in the joint preamble, part 12 of chapter I of title 12 of the Code of Federal Regulations is proposed to be am ended to read as follows: Subpart B— Qualification Requirements for Transactions in Certain Securities §12.10 Scope. This subpart is issued by the Comptroller of the Currency pursuant to 12 U.S.C. 24, 93a, 1818 and 1831p1(a)(2). It contains rules prescribing operational and managerial standards for national banks, and prescribes training and qualification requirem ents for bank employees making retail solicitations, recom mendations, purchases, or sales of certain securities on behalf of a national bank. It applies to all national banks that engage through bank em ployees in bank-direct retail 68832 Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules solicitations, recom m endations, purchases, or sales of certain securities. §12.11 Definitions. For purposes of this subpart: (a) Appropriate qualification exam ination m eans either the Investm ent Company/Variable Contracts Products Limited Representative Qualification Exam ination (Series 6 Examination) or the General Securities Registered Representative Exam ination (Series 7 Examination), both of w hich are adm inistered by the NASD. The Series 6 Examination is the appropriate qualification exam ination for a bank employee engaged solely in covered transactions of open-end investm ent com pany shares, original distribution closed-end investm ent com pany shares, u n it investm ent trusts, or variable contracts, including variable life insurance contracts and variable annuity contracts. The Series 7 Exam ination is the appropriate qualification exam ination for a bank employee soliciting, recom mending, purchasing, or selling any other covered product. (b) B ank m eans any national banking association, any District bank, or any Federal branch or agency of a foreign bank. The term “bank” shall not include a branch of a bank located outside of any State, as defined in section 3(a)(3) of the Federal Deposit Insurance Act, as am ended, 12 U.S.C. 1813(a)(3). (c) B ank securities representative m eans any bank officer, director, or employee (collectively referred to as “em ployee”) w ho engages in a covered transaction or is designated as the supervisor of a bank securities representative w ho engages in a covered transaction. (d) Continuing education requirem ents m eans the course of study specified in § 12.16. (e) Covered product has the same m eaning as “ security” as defined at section 3(a)(10) of the Securities Exchange Act, 15 U.S.C. 78c(a)(10). The term shall not include any product that is a deposit as defined in section 3(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(1), or any “government security” as defined at section 3(a)(42) of the Securities Exchange Act, 15 U.S.C. 78c(a)(42). (f) Covered transaction m eans a retail solicitation, recom m endation, purchase, or sale of a covered product by a bank through its employee regardless of the m eans through w hich the solicitation, recom m endation, purchase, or sale occurs. The term shall not include a covered transaction involving a fiduciary account adm inistered by a bank, a sale of a m unicipal security by (2) No bank securities representative shall engage in a covered transaction if he or she is, or becomes, subject to disqualification, unless the bank that employs the bank securities representative has applied for and received approval from the OCC pursuant to § 12.15 for that person to qualify as a bank securities representative. (b) Sponsoring bank notices. (1) A bank seeking to engage in covered transactions shall file a com pleted Uniform Notice for Sponsoring Bank (Form SB). (2) A bank seeking to term inate its status as a Sponsoring Bank shall file a Uniform Request for Sponsoring Bank W ithdraw al (Form SBW). (c) Sponsoring ba nk requirem ents. (1) A bank seeking to sponsor an employee as a bank securities representatives shall: (1) Make independent inquiry into the indiv id u al’s em ploym ent history, including contacting the em ployee’s previous employers for the past three years and investigating the character, business reputation, qualifications, and experience of the individual; (ii) Review, complete as appropriate, and file the Uniform A pplication for Bank Securities Representative Registration or Transfer (Form U-4B) and am endm ents thereto on behalf of the employee; and (iii) File a fingerprint record for the employee. (2) A bank may not sponsor an employee to qualify as a bank securities representative or perm it a previously qualified bank securities representative to engage in covered transactions if the individual is, or becomes, subject to disqualification unless the sponsoring bank has applied and received approval for the individual to engage in covered transactions from the OCC under § 12.15. A bank shall not sponsor an employee to qualify as a bank securities representative if it does not intend for the employee to engage in or supervise covered transactions or participate in one of the activities enum erated in §12.14. (3) A sponsoring bank shall file a Uniform Term ination Notice for Bank Securities Representative Registration (Form U-5B) w hen the em ploym ent of a bank securities representative §12.12 Qualification requirements. term inates or w hen a bank securities (a) Disqualifications. (1) A bank shall representative ceases to engage in covered transactions on behalf of the not engage in a covered transaction if it bank. The Form U-5B shall be filed is, or becomes, subject to w ith in 30 days of such term ination or disqualification, unless it has applied for and received approval to engage in cessation and a copy of the Form U-5B, and of any am endm ents to the Form U covered transactions from the OCC 5B, shall be provided concurrently to p ursuant to § 12.15. a m unicipal securities dealer bank registered under section 15B of the Securities Exchange Act, 15 U.S.C. 78o4, or a transaction by a bank in its own securities consistent w ith the conditions set forth in Securities Exchange Act Rule 3a4-l(a)(4), 17 CFR 240.3a41(a)(4). (g) Disciplinary action m eans an action resulting in: (1) An individual being “subject to disqualification” as defined in this subpart; (2) A civil m oney penalty or fine of $5,000 or more by the Securities and Exchange Commission (SEC) or a securities self regulatory organization (SSRO) as defined in section 3(a)(26) of the Securities Exchange Act, 15 U.S.C. 78c(a)(26); (3) A civil m oney penalty of $5,000 or more by a Federal banking agency pursuant to section 8 of the Federal Deposit Insurance Act, 12 U.S.C. 1818, for a securities law violation, or an unsafe or unsound practice related to a covered transaction; (4) An agreement w ith the SEC, an SSRO, or Federal banking agency, in connection w ith a disciplinary proceeding; or (5) An order by the SEC, an SSRO, or a Federal banking agency to enter the continuing education program. (h) NASD m eans the National A ssociation of Securities Dealers, Inc., w hich is an SSRO registered under section 15A of the Securities Exchange Act, 15 U.S.C. 78o, and NASD Regulation, Inc., the regulatory subsidiary of the NASD. (i) Sponsoring bank m eans a bank that engages in or seeks to engage in the business of effecting covered transactions. (j) Subject to disqualification means: (1) Subject to a “ statutory disqualification” as that term is used in section 3(a)(39) of the Securities Exchange Act, 15 U.S.C. 78c(a)(39); (2) Subject to an order of removal, prohibition, or suspension by a Federal banking agency pursuant to 12 U.S.C. 1818(e) or (g); (3) Subject to an order or temporary order p ursuant to 12 U.S.C. 1818(b) or (c) that restricts the fiduciary or securities activities of a bank or individual; or (4) Subject to a prohibition pursuant to 12 U.S.C. 1829(a). Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules the former bank securities representative. (4) A sponsoring bank shall designate one or more bank securities representatives, as necessary, to supervise the sponsoring b ank’s covered transactions. A supervisor designated u nder this subpart shall pass the appropriate qualification exam ination for any bank securities representative(s) u n d er his or h er supervision. (d) B ank securities representative requirem ents. (1) A bank employee seeking to qualify as a bank securities representative shall complete the Form U— provide a fingerprint record, and 4B, pass the appropriate qualification examination. (2) A bank employee w ho is eligible for an exam ination exem ption under paragraph (e) of this section m ust complete a Form U— and receive 4B approval u nder paragraph (f) of this section prior to being qualified as a bank securities representative. (3) A bank employee w ho fails to pass the appropriate qualification exam ination may take the exam ination again after a period of 30 calendar days has elapsed from the date of the prior exam ination. However, any bank employee w ho fails to pass an exam ination three or more tim es in succession may n ot take the exam ination u ntil 180 days has elapsed from the date of his or her last attem pt to pass the examination. (4) A bank employee shall advise the sponsoring bank w ithin 30 days of any event or occurrence that causes any inform ation on the Form U-4B or Form U-5B to become inaccurate or incom plete and shall cooperate w ith the sponsoring bank in filing an am endm ent to the relevant form. (5) A bank securities representative w ho does not engage in or supervise covered transactions for a period of two years m ust retake and pass the appropriate qualification exam ination prior to acting as a bank securities representative. A bank securities representative is deem ed to be engaging in covered transactions if the employee acts in one of the capacities listed in §12.14. (e) Exam ination exem ptions. (1) A bank employee is not required to take the appropriate qualification exam ination if he or she already has qualified by taking that examination pursuant to the rules of an SSRO and rem ains qualified as a registered representative. (2) U pon w ritten request from a sponsoring bank, the OCC may, in exceptional cases and w here good cause is shown, w aive the appropriate qualification exam ination requirem ent for a bank employee and may accept other evidence of the em ployee’s qualifications to act as a bank securities representative. A dvanced age, physical infirmity, or experience in fields ancillary to the investm ent banking or securities business generally are insufficient for the OCC to waive the exam ination requirement. (f) A pproval o f bank securities representative qualifications. No sponsoring bank may perm it any bank employee to, and no bank employee shall, act as a bank securities representative un til the OCC has approved the bank em ployee’s application for registration or transfer on Form U-4B. (g) Grace period. These qualification requirem ents apply to all banks and bank em ployees w ith respect to covered transactions transacted after [Date One Year After Effective Date of the Final Rule], Any bank or bank employee that is not in com pliance w ith this subpart after the grace period shall cease engaging in covered transactions until the requirem ents are met. §12.13 Filing requirements, amendments, and record retention. (a) All filings required u n der this subpart shall be filed w ith the OCC at the NASD. (b) All inform ation subm itted on any filing required u nder this subpart m ust be true, current, complete, and not m isleading at the time and in light of the circumstances u nder w hich it is reported. (c) A bank shall file an am endm ent no later than 30 days after learning of facts or circum stances causing a filing to be inaccurate or incomplete. (d)(1) A bank shall retain copies of all filings m ade on Forms U-4B and U-5B, including am endm ents, for n ot less than three years after the employee term inates em ploym ent w ith the sponsoring bank or ceases to act as a bank securities representative. (2) A bank shall retain copies of all filings m ade on Forms SB and SBW and any applications under § 12.15, including am endm ents, for not less than three years after the bank term inates its status as a sponsoring bank. § 12.14 Optional designation as a bank securities representative. A bank may sponsor an employee who is engaged in legal, compliance, internal audit, or sim ilar responsibilities related to covered transactions or w ho provides adm inistrative support functions for a bank securities representative, and who is not subject to disqualification (unless a w aiver is granted pursuant to § 12.15), to take 68833 either the Series 6 or Series 7 Examination. Such sponsored employee m ust m eet all filing and continuing education requirem ents in order to be deem ed to be a bank securities representative for purposes of this subpart. § 12.15 Applications by banks and bank employees “subject to disqualification.” A sponsoring bank m ay seek, by w ritten application to the OCC on behalf of itself or an employee, relief from being subject to disqualification and perm ission to engage in covered transactions or to qualify as a bank securities representative, as appropriate. The OCC may, consistent w ith safety and soundness, the public interest, and the protection of investors, grant such relief consistent w ith its enforcement powers and on such terms and conditions as the OCC considers necessary or appropriate. § 12.16 Continuing education and training requirements. A bank securities representative and a sponsoring bank shall comply w ith the following continuing education requirem ents: (a) B ank securities representative requirem ents. (1) Each bank securities representative shall complete, w ithin 120 days of the second, fifth, and tenth anniversaries of passing the appropriate qualification examination, the Continuing Education Program adm inistered by the NASD. (2) The required training intervals for bank securities representatives who were registered w ith an SSRO prior to being em ployed by the sponsoring bank are m easured from the date of SSRO registration. The bank securities representative requirem ents of the continuing education requirem ent w ill be m et as of the tenth anniversary of a bank securities representative’s registration w ith a banking agency and/ or SSRO, provided the bank securities representative is not subject to paragraph (a)(4) of this section. (3) If a bank securities representative has been subject to a disciplinary action w ithin the ten years prior to the effective date of this subpart, or at any time since that effective date, the bank securities representative m ust complete the Continuing Education Program adm inistered by the NASD w ithin 120 days of the disciplinary action and no later than the second, fifth, and tenth anniversaries of the disciplinary action. (4) Unless otherwise determ ined by the OCC, any bank securities representative who does not complete the requirem ents w ith in the prescribed time frames may not perform any bank 68834 Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules Dated: December 10,1996. securities representative duties. The Eugene A. Ludwig, OCC may, u p o n application and a showing of good cause, allow additional Comptroller o f the Currency. time for a bank securities representative Federal Reserve System to satisfy the Continuing Education 12 CFR Part 208 program requirements. For the reasons set forth in the (b) Sponsoring bank requirements. (1) preamble, the Board proposes to am end A sponsoring bank shall n ot perm it any 12 CFR Parts 208 and 211 as follows: employee to act as a bank securities representative unless the employee has PART 208— MEMBERSHIP OF STATE com plied w ith the requirem ents set BANKING INSTITUTIONS IN THE forth in paragraphs (a)(1) through (a)(4) FEDERAL RESERVE SYSTEM of this section. (REGULATION H) (2) A sponsoring bank shall m aintain 1. The authority citation for part 208 a continuing education program for its is revised to read as follows: bank securities representatives. A Authority: 12 U.S.C. 36, 248, 321-338a, sponsoring bank, at least annually, shall 371d, 461, 481-486, 601, 611, 1814, 1816, evaluate and prioritize its training needs 1818, 1823(j), 1828(o), 1831p-l, 1831p1(a)(2), 1831r-l, 2901-2907, 3105, 3310, and develop or update, as appropriate, 3331-3351, and 3906-3909; 15 U.S.C. 78b, a w ritten training plan. The plan m ust 781(b), 781(g), 781(1), 78o-4(c)(5), 78q, 78q-l, take into consideration the b ank’s size, and 78w; 31 U.S.C. 5318; 42 U.S.C. 4012a, organizational structure, and scope of 4104a, 4104b, 4106, and 4128. business activities. Programs used to 2. A new § 208.25 is added at the end im plem ent a sponsoring bank’s training of Subpart A to read as follows: plan m ust be appropriate for the business of that bank and, at a §208.25 Qualification requirements for transactions in certain securities. m inim um , m ust cover the following (a) Scope. This section contains rules m atters concerning securities products, prescribing operational and managerial services, and strategies offered by the standards for state m em ber banks, bank: prescribes training and qualification (i) General investm ent features and requirem ents for bank employees associated risk factors; making retail solicitations, (ii) Suitability and sales practice recom m endations, purchases, or sales of considerations; certain securities on behalf of a state member bank. It applies to all state (iii) Applicable regulatory member banks that engage through bank requirements; and employees in bank-direct retail (iv) Bank policies and procedures for solicitations, recomm endations, covered transactions. purchases, or sales of certain securities. (b) Definitions. For purposes of this (3) A sponsoring bank shall section: adm inister its continuing education (1) A ppropriate qualification programs in accordance w ith its annual exam ination m eans either the evaluation and w ritten plan and m ust Investm ent Company/Variable Contracts m aintain records docum enting the content of the programs and com pletion Products Limited Representative Q ualification Exam ination (Series 6 of the programs by its bank securities Examination) or the General Securities representatives. Registered Representative Examination (Series 7 Examination), both of w hich § 12.17 Confidentiality of qualification are adm inistered by the National examinations. Association of Securities Dealers, Inc. Every bank and bank employee shall (NASD). The Series 6 Exam ination is the m aintain the confidentiality of appropriate qualification exam ination qualification exam inations and shall not for a bank employee engaged solely in remove from an exam ination center, covered transactions of open-end reproduce, disclose, receive from or investm ent com pany shares, original pass to any person, or use for study or distribution closed-end investm ent any other purposes, any portion of an com pany shares, unit investm ent trusts, exam ination, w hether of a present or or variable contracts, including variable past series, that w ould com prom ise the life insurance contracts and variable annuity contracts. The Series 7 integrity of the exam inations, or use in Exam ination is the appropriate any m anner and at any time the qualification exam ination for a bank questions or answers to the employee soliciting, recomm ending, examination. purchasing, or selling any other covered product. (2) B ank m eans any state member bank. The term bank shall not include a branch of a bank located outside of any State, as defined in section 3(a)(3) of the Federal Deposit Insurance Act, as am ended, 12 U.S.C. 1813(a)(3). (3) B ank securities representative m eans any bank officer, director, or employee (collectively referred to as employee) w ho engages in a covered transactions or is designated as the supervisor of a bank securities representative w ho engages in a covered transaction. (4) Continuing education requirem ents means the course of study specified in paragraph (g) of this section. (5) Covered product has the same m eaning as “security” as defined at section 3(a)(10) of the Securities Exchange Act, 15 U.S.C. 78c(a)(10). The term shall not include any product that is a deposit as defined in section 3(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(1), or any “government security” as defined at section 3(a)(42) of the Securities Exchange Act, 15 U.S.C. 78c(a)(42). (6) Covered transaction m eans a retail solicitation, recom m endation, purchase, or sale of a covered product by a bank through its employee regardless of the m eans through w hich the solicitation, recom m endation, purchase, or sale occurs. The term shall not include a such a transaction in a covered product to a fiduciary account adm inistered by a bank, a sale of a m unicipal security by a m unicipal securities dealer bank registered under section 15B of the Securities Exchange Act, 15 U.S.C. 78o4, or a transaction by a bank in its own securities consistent w ith the conditions set forth in Securities Exchange Act Rule 3a4— 1(a)(4), 17 CFR 240.3a41(a)(4). (7) D isciplinary action m eans an action resulting in: (i) An individual being subject to disqualification as defined in paragraph (b)(10) of this section; (ii) A civil m oney penalty or fine of $5,000 or more by the Securities and Exchange Commission (SEC) or a securities self-regulatory organization (SSRO) as defined in section 3(a)(26) of the Securities Exchange Act, 15 U.S.C. 78c(a)(26); (iii) A civil m oney penalty of $5,000 or more by a Federal banking agency pursuant to section 8 of the Federal Deposit Insurance Act, 12 U.S.C. 1818, for a securities law violation, or an unsafe or u nso u n d practice related to a covered transaction; Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules (iv) An agreement w ith the SEC, an SSRO, Federal banking agency, in connection w ith a disciplinary proceeding; or (v) An order by the SEC, an SSRO, or a Federal banking agency to enter the continuing education program. (8) N ASD m eans the National A ssociation of Securities Dealers, Inc., w hich is an SSRO registered under section 15 A of the Securities Exchange Act, 15 U.S.C. 78o, and NASD Regulation, Inc., the regulatory subsidiary of the NASD. (9) Sponsoring bank m eans a bank that engages in or seeks to engage in the business of effecting covered transactions. (10) Subject to disqualification means subject to: (1) A “ statutory disqualification” as that term is used in section 3(a)(39) of the Securities Exchange Act, 15 U.S.C. 78c(a)(39); (11) An order of removal, prohibition, or suspension by a Federal banking agency p ursu an t to 12 U.S.C. 1818 (e) or (g); (iii) A n order or tem porary order pursuant to 12 U.S.C. 1818 (b) or (c) that restricts the fiduciary or securities activities of a bank or individual; or (iv) A prohibition p ursu an t to 12 U.S.C. 1829(a). (c) Q ualification requirem ents—(1) Disqualifications, (i) A bank shall not engage in a covered transaction if it is, or becomes, subject to disqualification, unless it has applied for and received approval to engage in covered transactions from the Board pursuant to paragraph (h) of this section. (ii) No bank securities representative shall engage in a covered transaction if he or she is, or becomes, subject to disqualification, unless the bank that employs the bank securities representative has applied for and received approval from the Board pursuant to paragraph h of this section for that person to qualify as a bank securities representative. (2) Sponsoring bank notices, (i) A bank seeking to engage in covered transactions shall file a com pleted Uniform Notice for Sponsoring Bank (Form SB). (ii) A bank seeking to term inate its status as a Sponsoring Bank shall file a Uniform Request for Sponsoring Bank W ithdraw al (Form SBW). (3) Sponsoring bank requirem ents, (i) A bank seeking to sponsor an employee as a bank securities representative shall: (A) Make independent inquiry into the ind ivid u al’s em ploym ent history, including contacting the em ployee’s previous employers for the past three years and investigating the character, business reputation, qualifications and experience of the individual; (B) Review, com plete as appropriate, and file the Uniform A pplication for Bank Securities Representative Registration or Transfer (Form U— 4B) and am endm ents thereto on behalf of the employee; and (C) File a fingerprint record for the employee. (ii) A bank m ay not sponsor an em ployee to qualify as a bank securities representative or perm it a previously qualified bank securities representative to engage in covered transactions if the individual is, or becomes, subject to disqualification unless the sponsoring bank has applied and received approval for the individual to engage in covered transactions from the Board u nder paragraph (h) of this section. A bank shall not sponsor an em ployee to qualify as a bank securities representative if it does not intend for the employee to engage in or supervise covered transactions or participate in one of the activities enum erated in paragraph (e) of this section. (iii) A sponsoring bank shall file a Uniform Term ination Notice for Bank Securities Representative Registration (Form U-5B) w hen the em ploym ent of a bank securities representative term inates or w hen a bank securities representative ceases to engage in covered transactions on behalf of the bank. The Form U-5B shall be filed w ith in 30 days of such term ination or cessation and a copy of the Form U-5B, and of any am endm ents to the Form U— 5B, shall be provided to the former bank securities representative. (iv) A sponsoring bank shall designate one or more bank securities representatives to supervise the sponsoring bank’s covered transactions. A supervisor designated u n d er this section shall pass the appropriate qualification exam ination for any bank securities representative(s) u nder his or her supervision. (4) B ank securities representative requirements, (i) A bank employee seeking to qualify as a bank securities representative shall com plete the designated sections of the Form U-4B, provide a fingerprint record, and pass the appropriate qualification examination. (ii) A bank employee w ho is eligible for an exam ination exem ption under paragraph (c)(5)(i) of this section m ust com plete a Form U-4B and receive approval u nder paragraph (c)(6) of this section prior to being qualified as a bank securities representative. (iii) A bank employee w ho fails to pass the appropriate qualification exam ination m ay take the exam ination 68835 again after a period of 30 calendar days has elapsed from the date of the prior exam ination. However, any bank employee w ho fails to pass an exam ination three or more times in succession may not take the exam ination u ntil 180 days has elapsed from the date of his or her last attem pt to pass the examination. (iv) A bank employee shall advise the sponsoring bank w ithin 30 days of any event or occurrence that causes any inform ation on the Form U-4B or Form U-5B to become inaccurate or incom plete and shall cooperate w ith the sponsoring bank in filing an am endm ent to the relevant form. (v) A bank securities representative w ho does not engage in or supervise covered transactions for a period of two years m ust retake and pass the appropriate qualification examination prior to acting as a bank securities representative. A bank securities representative is deem ed to be engaging in covered transactions if the employee acts in one of the capacities listed in paragraph (e) of this section. (5) E xam ination exem ptions, (i) A bank employee is not required to take the appropriate qualification exam ination if he or she already has qualified by taking that exam ination pursuant to the rules of an SSRO and rem ains qualified as a registered representative. (ii) Upon w ritten request from a sponsoring bank, the Board may, in exceptional cases and w here good cause is shown, w aive the appropriate qualification exam ination requirem ent for a bank employee and m ay accept other evidence of the em ployee’s qualifications to act as a bank securities representative. Advanced age, physical infirmity, or experience in fields ancillary to the investm ent banking or securities business generally are insufficient for the Board to w aive the exam ination requirem ent. (6) A pproval o f bank securities representative qualifications. No sponsoring bank may perm it any bank employee to, and no bank employee shall, act as a bank securities representative until the Board has approved the bank em ployee’s application for registration or transfer on Form U-4B. (7) Grace period. These qualification requirem ents apply to all banks and bank em ployees w ith respect to covered transactions transacted after Date One Year After Effective Date of the Final Rule. Any bank or bank employee that is not in com pliance w ith this section after the grace period shall cease engaging in covered transactions until the requirem ents are met. 68836 Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules (d) Filing requirem ents, am endm ents, a nd record retention. (1) All filings required u n d er this section shall be filed w ith the Board at the NASD. (2) All inform ation subm itted under this section m ust be true, current, com plete, and not m isleading at the tim e and in light of the circum stances u n d er w hich it is reported. (3) A bank shall file an am endm ent no later than 30 days after learning of facts or circum stances causing a filing to be inaccurate or incomplete. (4) A bank shall retain copies of all filings: (i) Made on Forms U-4B and U-5B, including am endm ents, for not less than three years after the employee term inates em ploym ent w ith the sponsoring bank or ceases to act as a bank securities representative; and (ii) M ade on Forms SB and SBW and any applications u nder paragraph (f) of this section including am endm ents for not less than three years after the bank term inates its status as a sponsoring bank. (e) O ptional designation as a bank securities representative. A bank may sponsor an employee w ho is engaged in legal, com pliance, internal audit, or sim ilar responsibilities related to covered transactions or w ho provides adm inistrative support functions for a bank securities representative, and who is not subject to disqualification (unless a w aiver is granted pursuant to paragraph (f) of this section), to take the appropriate qualification examination. Such sponsored employee m ust m eet all filing and continuing education requirem ents of this section in order to be deem ed to be a bank securities representative for purposes of this section. (f) A pplications by banks and bank em ployees “subject to disqualification.” A sponsoring bank may seek, by w ritten application to the Board on behalf of itself or an employee, relief from being subject to disqualification and perm ission to engage in covered transactions or to qualify as a bank securities representative, as appropriate. The Board may, consistent w ith safety and soundness, the public interest, and the protection of investors, grant such relief consistent w ith its enforcement powers and on such terms and conditions as the Board considers necessary or appropriate. (g) Continuing education a nd training requirem ents. A bank securities representative and a sponsoring bank shall comply w ith the following continuing education requirements: (1) B ank securities representative requirem ents, (i) Each bank securities representative shall complete, w ithin 120 days of the second, fifth, and tenth anniversaries of passing the appropriate qualification examination, the Continuing Education Program adm inistered by the NASD. (ii) The required training intervals for bank securities representatives who were registered w ith an SSRO prior to being em ployed by the sponsoring bank are m easured from the date of SSRO registration. The bank securities representative requirem ents of the continuing education requirem ent w ill be m et as of the tenth anniversary of a bank securities representative’s registration w ith a banking agency and/ or SSRO, provided the bank securities representative is not subject to paragraph (g)(l)(iv) of this section. (iii) If a bank securities representative has been subject to a disciplinary action w ithin the ten years prior to the effective date of this section, or at any tim e since that effective date, the bank securities representative m ust complete the Continuing Education Program adm inistered by the NASD w ithin 120 days of the disciplinary action and no later than the second, fifth, and tenth anniversaries of the disciplinary action. (iv) Unless otherwise determ ined by the Board, any bank securities representative w ho does not complete the requirem ents w ith in the prescribed tim e frames may not perform any bank securities representative duties. The Board may, upon application and a showing of good cause, allow additional tim e for a bank securities representative to satisfy the Continuing Education program requirem ents of the bank securities representative requirem ents. (2) Sponsoring bank requirements, (i) A sponsoring bank shall not perm it any employee to act as a bank securities representative unless the employee has com plied w ith the requirem ents set forth in paragraph (g)(1) of this section. (ii) A sponsoring bank shall m aintain a continuing education program for its bank securities representatives. A sponsoring bank, at least annually, shall evaluate and prioritize its training needs and develop or update, as appropriate, a w ritten training plan. The plan m ust take into consideration the b ank’s size, organizational structure, and scope of business activities. Programs used to im plem ent a sponsoring bank’s training plan m ust be appropriate for the business of that bank and, at a m inim um , m ust cover the following matters concerning securities products, services, and strategies offered by the bank: (A) General investm ent features and associated risk factors; (B) Suitability and sales practice considerations; (C) A pplicable regulatory requirements; and (D) Bank policies and procedures for covered transactions. (iii) A sponsoring bank shall adm inister its continuing education programs in accordance w ith its annual evaluation and w ritten plan and m ust m aintain records docum enting the content of the programs and com pletion of the programs by its bank securities representatives. (h) Confidentiality o f qualification examinations. Every bank and bank employee shall m aintain the confidentiality of qualification exam inations and shall not remove from an exam ination center, reproduce, disclose, receive from or pass to any person, or use for study or any other purposes, any portion of an exam ination, w hether of a present or past series, that w ould com prom ise the integrity of the exam inations, or use in any m anner and at any time, the questions or answers to the examination. PART 211— INTERNATIONAL BANKING OPERATIONS (REGULATION K) 1. The authority citation for Part 211 continues to read as follows: Authority: 12 U.S.C. 221 et seq., 1818, 1841 et seq., 3101 et seq., 3901 et seq. 2. Section 211.28 is am ended as follows: a. The section heading is revised; b. Paragraphs (a) and (b) are redesignated as paragraphs (a)(1) and (a)(2) respectively; c. A heading is added to paragraph (a); d. All references to “paragraph (a)” and “paragraph (b)” are revised to read “paragraph (a)(1)” and “paragraph (a)(2)” respectively; and, e. A new paragraph (b) is added. The revisions and additions read as follows: § 211.28 Provisions applicable to state branches and agencies. (a) Limitation on loans to one borrower—(1) Limitation. * * * * * * * * (b) Retail securities transactions—(1) Requirements. To the extent that an uninsured state branch or a state agency is excluded from the definition of “broker” u nder section 3(a)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(4)) and engages in an activity that w ould constitute a covered transaction as defined in § 208.25 of the Board’s Regulation H (12 CFR 208.25) for a state member bank, the state branch or agency shall be subject to the Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules requirem ents of 12 CFR 208.25 in the same m anner th at such requirem ents apply to a state m em ber bank. (2) Exception. Nothing in paragraph (b)(1) of this section is intended to apply the requirem ents of 12 CFR 208.25 to the lawful deposit-taking activities of an u n insured state branch or state agency. 68837 Investm ent Company/Variable Contracts Rule 3a4— 1(a)(4), 17 CFR 240.3a4Products Lim ited Representative 1(a)(4). Qualification E xam ination (Series 6 (g) D isciplinary action m eans an action resulting in: Examination) or the General Securities (1) An individual being “subject to Registered Representative Exam ination disqualification” as defined in this part; (Series 7 Examination), both of w hich (2) A civil m oney penalty or fine of are adm inistered by the NASD. The $5,000 or more by the Securities and Series 6 Examination is the appropriate Exchange Comm ission (SEC) or a qualification exam ination for a bank By order of the Board of Governors of the securities self-regulatory organization em ployee engaged solely in covered Federal Reserve System, December 11,1996. (SSRO) as defined in section 3(a)(26) of transactions of open-end investm ent William W. Wiles, com pany shares, original distribution the Securities Exchange Act, 15 U.S.C. Secretary of the Board. closed-end investm ent com pany shares, 78c(a)(26); Federal Deposit Insurance Corporation (3) A civil m oney penalty of $5,000 or u nit investm ent trusts, or variable m ore by a Federal banking agency contracts, including variable life 12 CFR Part 342 pursuant to section 8 of the Federal insurance contracts and variable Authority and Issuance annuity contracts. The Series 7 Deposit Insurance Act, 12 U.S.C. 1818, Exam ination is the appropriate for a securities law violation, or an For the reasons set forth in the joint qualification exam ination for a bank unsafe or u nso u n d practice related to a preamble, part 342 of title 12 of the covered transaction; Code of Federal Regulations is proposed employee soliciting, recomm ending, purchasing, or selling any other covered (4) An agreement w ith the SEC, an to be added as follows: product. SSRO, or Federal banking agency, in PART 342— QUALIFICATION (b) B ank m eans any State nonm em ber connection w ith a disciplinary REQUIREMENTS FOR TRANSACTIONS insured bank (except a D istrict bank) or proceeding; or IN CERTAIN SECURITIES a foreign bank having an insured (5) An order by the SEC, an SSRO, or branch. The term “bank” shall not a Federal banking agency to enter the Sec. include a branch of a bank located continuing education program. 342.1 Scope. outside of any State, as defined in (h) N A SD m eans the National 342.2 Definitions. section 3(a)(3) of the Federal Deposit Association of Securities Dealers, Inc., 342.3 Qualification requirements. Insurance Act, as am ended, 12 U.S.C. w hich is an SSRO registered under 342.4 Filing requirements, amendments, 1813(a)(3). and record retention. section 15A of the Securities Exchange (c) B ank securities representative 342.5 Optional designation as a bank Act, 15 U.S.C. 78o, and NASD securities representative. m eans any bank officer, director, or Regulation, Inc., the regulatory 342.6 Applications by banks and bank employee (collectively referred to as subsidiary of the NASD. employees “subject to disqualification.” “em ployee”) w ho engages in a covered (i) Sponsoring bank m eans a bank that 342.7 Continuing education and training transaction or is designated as the engages in or seeks to engage in the requirements. supervisor of a bank securities business of effecting covered 342.8 Confidentiality of qualification representative w ho engages in a covered transactions., examinations. transaction. (j) Subject to disqualification means: Authority: 12 U.S.C. 1818 and 1831p(d) Continuing education (1) a “ Statutory disqualification” as 1(a)(2) requirem ents m eans the course of study that term is used in section 3(a)(39) of specified in § 342.7. §342.1 Scope. the Securities Exchange Act, 15 U.S.C. (e) Covered product has the same This part is issued by the Federal 78c(a)(39); m eaning as “security” as defined at Deposit Insurance Corporation (the (2) A n order of removal, prohibition, Corporation) pursuant to 12 U.S.C. 1818 section 3 (a) (10) of the Securities or suspension by a Federal banking Exchange Act, 15 U.S.C. 78c(a)(10). The and 1831p-l(a)(2). It contains rules agency pursuant to 12 U.S.C. 1818(e) or term shall not include any product that prescribing operational and managerial (g); is a deposit as defined in section 3(1) of (3) An order or tem porary order standards for state nonm em ber insured the Federal Deposit Insurance Act, 12 pursuant to 12 U.S.C. 1818 (b) or (c) that banks (except a District bank) or a U.S.C. 1813(1), or any “government restricts the fiduciary or securities foreign bank having an insured branch, activities of a bank or individual; or and prescribes training and qualification security” as defined at section 3(a)(42) of the Securities Exchange Act, 15 (4) A prohibition p ursu an t to 12 requirem ents for bank em ployees U.S.C. 78c(a)(42). U.S.C. 1829(a). making retail solicitations, (f) Covered transaction m eans a retail recom m endations, purchases, or sales of solicitation, recom m endation, purchase, §342.3 Qualification requirements. certain securities on behalf of a state or sale of a covered product by a bank (a) Disqualifications. (1) A bank shall nonm em ber insured bank (except a through its employee regardless of the not engage in a covered transaction if it District bank) or a foreign bank having m eans through w hich the solicitation, is, or becomes, subject to an insured branch. It applies to all state recom m endation, purchase, or sale disqualification, unless it has applied nonm em ber insured banks (except a occurs. The term shall not include a for and received approval to engage in District bank) or a foreign bank having covered transaction involving a covered transactions from the an insured branch that engage through fiduciary account adm inistered by a Corporation p ursuant to § 342.6. bank em ployees in bank-direct retail bank, a sale of a m unicipal security by (2) No bank securities representative solicitations, recom m endations, a m unicipal securities dealer bank shall engage in a covered transaction if purchases, or sales of certain securities. he or she is, or becomes, subject to registered u nder section 15B of the §342.2 Definitions. disqualification, unless the bank that Securities Exchange Act, 15 U.S.C. 78o4, or a transaction by a bank in its own employs the bank securities For purposes of this part: (a) A ppropriate qualification securities consistent w ith the conditions representative has applied for and exam ination m eans either the set forth in Securities Exchange Act received approval from the Corporation 68838 Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules p ursuant to § 342.6 for that person to qualify as a bank securities representative. (b) Sponsoring ba nk notices. (1) A bank seeking to engage in covered transactions shall file a com pleted Uniform Notice for Sponsoring Bank (Form SB). (2) A bank seeking to term inate its status as a Sponsoring Bank shall file a Uniform Notice for Sponsoring Bank W ithdraw al (Form SBW). (c) Sponsoring b ank requirem ents. (1) A bank seeking to sponsor an employee as a bank securities representative shall: (1) Make independent inquiry into the in d iv id ual’s em ploym ent history, including contacting the em ployee’s previous employers for the past three years and investigating the character, business reputation, qualifications, and experience of the individual; (ii) Review, com plete as appropriate, and file the Uniform A pplication for Bank Securities Representative Registration or Transfer (Form U-4B) and am endm ents thereto on behalf of the employee; and (iii) File a fingerprint record for the employee. (2) A bank may not sponsor an employee to qualify as a bank securities representative or perm it a previously qualified bank securities representative to engage in covered transactions if the individual is, or becomes, subject to disqualification unless the sponsoring bank has applied and received approval for the individual to engage in covered transactions from the Corporation under § 342.6. A bank shall not sponsor an employee to qualify as a bank securities representative if it does not intend for the employee to engage in or supervise covered transactions or participate in one of the activities enum erated in §342.5. (3) A sponsoring bank shall file a Uniform Term ination Notice for Bank Securities Representative Registration (Form U-5B) w hen the em ploym ent of a bank securities representative term inates or w h en a bank securities representative ceases to engage in covered transactions on behalf of the bank. The Form U-5B shall be filed w ithin 30 days of such term ination or cessation and a copy of the Form U-5B, and of any am endm ents to the Form U 5B, shall be provided concurrently to the former bank securities representative. (4) A sponsoring bank shall designate one or more bank securities representatives, as necessary, to supervise the sponsoring b ank’s covered transactions. A supervisor designated u nder this part shall pass the appropriate qualification exam ination for any bank securities representative(s) u nder his or her supervision. (d) B ank securities representative requirem ents. (1) A bank employee seeking to qualify as a bank securities representative shall com plete the Form U-4B, provide a fingerprint record, and pass the appropriate qualification examination. (2) A bank employee w ho is eligible for an exam ination exem ption under paragraph (e) of this section m ust com plete a Form U— and receive 4B approval u nder paragraph (f) of this section prior to being qualified as a bank securities representative. (3) A bank employee w ho fails to pass the appropriate qualification exam ination may take the exam ination again after a period of 30 calendar days has elapsed from the date of the prior examination. However, any bank employee w ho fails to pass an exam ination three or more tim es in succession m ay not take the exam ination until 180 days has elapsed from the date of his or her last attem pt to pass the examination. (4) A bank employee shall advise the sponsoring bank w ithin 30 days of any event or occurrence that causes any inform ation on the Form U-4B or Form U— to become inaccurate or 5B incom plete and shall cooperate w ith the sponsoring bank in filing an am endm ent to the relevant form. (5) A bank securities representative w ho does not engage in or supervise covered transactions for a period of two years m ust retake and pass the appropriate qualification exam ination prior to acting as a bank securities representative. A bank securities representative is deemed to be engaging in covered transactions if the employee acts in one of the capacities listed in §342.5. (e) E xam ination exem ptions. (1) A bank employee is not required to take the appropriate qualification exam ination if he or she already has qualified by taking that examination p ursuant to the rules of an SSRO and rem ains qualified as a registered representative. (2) Upon w ritten request from a sponsoring bank, the Corporation may, in exceptional cases and w here good cause is shown, waive the appropriate qualification exam ination requirem ent for a bank employee and may accept other evidence of the em ployee’s qualifications to act as a bank securities representative. Advanced age, physical infirmity, or experience in fields ancillary to the investm ent banking or securities business generally are insufficient for the Corporation to waive the examination requirement. (f) A pproval o f bank securities representative qualifications. No sponsoring bank may perm it any bank employee to, and no bank employee shall, act as a bank securities representative until the Corporation has approved the bank em ployee’s application for registration or transfer on Form U-4B. (g) Grace period. These qualification requirem ents apply to all banks and bank employees w ith respect to covered transactions transacted after Date one year after effective date of the Final Rule. Any bank or bank employee that is not in com pliance w ith this part after the grace period shall cease engaging in covered transactions u n til the requirem ents are met. §342.4 Filing requirements, amendments, and record retention. (a) All filings required u n der this part shall be filed w ith the Corporation at the NASD. (b) All inform ation subm itted on any filing required under this part m ust be true, current, complete, and not m isleading at the time and in light of the circumstances u nder w hich it is reported. (c) A bank shall file an am endm ent no later than 30 days after learning of facts or circum stances causing a filing to be inaccurate or incomplete. (d)(1) A bank shall retain copies of all filings m ade on Forms U— and U— 4B 5B, including am endm ents, for not less than three years after the employee term inates em ploym ent w ith the sponsoring bank or ceases to act as a bank securities representative. (2) A bank shall retain copies of all filings m ade on Forms SB and SBW and any applications u nder § 342.6, including am endm ents, for not less than three years after the bank term inates its status as a sponsoring bank. § 342.5 Optional designation as a bank securities representative. A bank may sponsor an employee w ho is engaged in legal, compliance, internal audit, or sim ilar responsibilities related to covered transactions or w ho provides adm inistrative support functions for a bank securities representative, and w ho is not subject to disqualification (unless a w aiver is granted p ursu an t to § 342.6), to take the appropriate qualification examination. Such sponsored employee m ust m eet all filing and continuing education requirem ents in order to be deemed to be a bank securities representative for purposes of this part. Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Proposed Rules §342.6 Applications by banks and bank employees “subject to disqualification." A sponsoring bank m ay seek, by w ritten application to the Corporation on behalf of itself or an employee, relief from being subject to disqualification and perm ission to engage in covered transactions or to qualify as a bank securities representative, as appropriate. The Corporation may, consistent w ith safety and soundness, the public interest, and the protection of investors, grant such relief consistent w ith its enforcem ent pow ers and on such terms and conditions as the Corporation considers necessary or appropriate. § 342.7 Continuing education and training requirements. A bank securities representative and a sponsoring bank shall comply w ith the following continuing education requirements: (a) B ank securities representative requirem ents. (1) Each bank securities representative shall complete, w ithin 120 days of the second, fifth, and tenth anniversaries of passing the appropriate qualification exam ination, the Continuing Education Program adm inistered by the NASD. (2) The required training intervals for bank securities representatives who were registered w ith an SSRO prior to being em ployed by the sponsoring bank are m easured from the date of SSRO registration. The bank securities representative requirem ents of the continuing education requirem ent will be met as of the tenth anniversary of a bank securities representative’s registration w ith a banking agency and/ or SSRO, provided the bank securities representative is not subject to paragraph (a)(4) of this section. (3) If a bank securities representative has been subject to a disciplinary action w ithin the ten years prior to the effective date of this part, or at any time since that effective date, the bank securities representative m ust complete the Continuing Education Program adm inistered by the NASD w ithin 120 days of the disciplinary action and no later than the second, fifth, and tenth anniversaries of the disciplinary action. (4) Unless otherwise determ ined by the Corporation, any bank securities representative who does not complete the requirem ents w ithin the prescribed tim e frames may not perform any bank securities representative duties. The Corporation may, upon application and a showing of good cause, allow additional tim e for a bank securities representative to satisfy the program requirements. (b) Sponsoring ban k requirements. (1) A sponsoring bank shall not perm it any employee to act as a bank securities representative unless the employee has com plied w ith the requirem ents set forth in paragraphs (a)(1) through (a)(4) of this section. (2) A sponsoring bank shall m aintain a continuing education program for its bank securities representatives. A sponsoring bank, at least annually, shall evaluate and prioritize its training needs and develop or update, as appropriate, a w ritten training plan. The plan m ust take into consideration the b ank’s size, organizational structure, and scope of business activities. Programs used to im plem ent a sponsoring b ank’s training plan m ust be appropriate for the business of that bank and, at a m inim um , m ust cover the following m atters concerning securities products, services, and strategies offered by the bank: (i) General investm ent features and associated risk factors; 68839 (ii) Suitability and sales practice considerations; (iii) A pplicable regulatory requirem ents; and (iv) Bank policies and procedures for covered transactions. (3) A sponsoring bank shall adm inister its continuing education programs in accordance w ith its annual evaluation and w ritten plan and m ust m aintain records docum enting the content of the programs and com pletion of the programs by its bank securities representatives. A bank m ay choose to use commercial training material and outside vendors to assist in meeting this education requirem ent if it ensures that the training material or program meets the content standards set forth in paragraph (b)(2) of this section. § 342.8 Confidentiality of qualification examinations. Every bank and bank employee shall m aintain the confidentiality of qualification examinations and shall not remove from an exam ination center, reproduce, disclose, receive from or pass to any person, or use for study or any other purposes, any portion of an exam ination, w hether of a present or past series, that w ould compromise the integrity of the examinations, or use in any m anner and at any tim e the questions or answers to the examination. By Order of the Board of Directors. Dated at Washington, D.C., this 11th day of December, 1996. Federal Deposit Insurance Corporation. Jerry L. Langley, Executive Secretary. [FR Doc. 96-32326 Filed 12-27-96; 8:45 am] BILLING CODE 4810-33-P, 6210-01-P, 6714-01-P Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Notice DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency FEDERAL RESERVE SYSTEM FEDERAL DEPOSIT INSURANCE CORPORATION Proposed Collection; Comment Request AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of Governors of the Federal Reserve System; and Federal Deposit Insurance Corporation. ACTION: Notice and request for comments. The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC) (collectively, the Agencies), as part of their continuing efforts to reduce paperw ork and respondent burden, invite the general public and other Federal agencies to com m ent on proposed inform ation collections, as required by the Paperw ork Reduction Act of 1995. Currently, the Agencies are soliciting com m ents concerning an inform ation collection titled (MA)— Financial Institutions Securities Qualifications Forms. DATES: W ritten com ments should be subm itted by February 28,1997. ADDRESSES: Direct all w ritten comments to: OCC: Com m unications Division, Attention: 1557— FISQ, T hird Floor, Office of the Comptroller of the Currency, 250 E Street, SW, W ashington, DC 20219. In addition, com ments may be sent by facsimile transm ission to (202) 874-5274, or by electronic m ail to REGS.COMMENTS@OCC.TREAS.GOV. Board: Mr. W illiam W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 20th and C Streets, N.W., W ashington, D.C. 20551, or delivered to the Board’s m ail room betw een 8:45 and 5:15 p.m., and to the security control room outside of those hours. Both the m ail room and the security control room are accessible from the courtyard entrance on 20th Street betw een C onstitution A venue and C Street, N.W. Comments received may be inspected in room M -P -500 between 9:00 a.m. and 5:00 p.m., except as SUMMARY: provided in section 261.8 of the Board’s Rules Regarding Availability of Information, 12 CFR 261.8(a). FDIC: Office of the Executive Secretary, Federal Deposit Insurance Corporation, 550 17th Street, N.W., W ashington, D.C. 20429. Comments may be hand-delivered to room F-402, 1776 F Street, N.W., W ashington, D.C. 20429, on business days betw een 8:30 a.m. and 5:00 p.m. Comments may be sent through facsimile to (202) 8 983838 or by the Internet to: COMMENTS@FDIC.GOV. Comments w ill be available for inspection at the FDIC Public Inform ation Center, room 100, 801 17th Street, N.W., W ashington, D.C., betw een 9:00 a.m. and 4:30 p.m. on business days. A copy of the com ments may also be subm itted to the OMB desk officer for the agencies: Alexander Hunt, Office of Information and Regulatory Affairs, Office of M anagement and Budget, New Executive Office Building, Room 3208, W ashington, D.C. 20503. FOR FURTHER INFORMATION CONTACT: Requests for additional inform ation or copies of the collection may be obtained by contacting: OCC: Jessie Gates or Dionne Walsh, (202) 874-5090, Legislative and Regulatory A ctivities Division (1557— FISQ), Office of the Com ptroller of the Currency, 250 E Street, SW, W ashington, DC 20219. Internet address: REGS.COMMENTS@OCC.TREAS.GOV. Board: Mary M. McLaughlin, Board Clearance Officer, (202) 452-3829, Division of Research and Statistics, Board of Governors of the Federal Reserve System, 20th & C Streets, N.W., W ashington, D.C. 20551. For the hearing im paired only, Telecom m unications Device for the Deaf (TDD), Dorothea Thom pson, (202) 452— 3544, Board of Governors of the Federal Reserve System, 20th & C Streets, N.W., W ashington, D.C. 20551. FDIC: Steven F. Hanft, FDIC Clearance Officer, (202) 898-3907, Office of the Executive Secretary, Federal Deposit Insurance Corporation, 550 17th Street, N.W., W ashington, D.C. 20429. Internet address: COMMENTS@FDIC.GOV. SUPPLEMENTARY INFORMATION: Title: (MA)—Financial Institutions Securities Qualifications Forms OMB Number: Not yet assigned. Form Num ber: Forms SB, SBW, U-4B, and U-5B. Abstract: This inform ation collection covers the securities qualifications 68841 forms for banks and bank employees involved in retail securities sales programs. This inform ation w ill prom ote safe and sound operations of financial institution-sponsored securities sales programs and will enhance custom er protection. A dditionally, the collection w ill be instrum ental in preventing unqualified or disqualified individuals from recom m ending or selling retail securities on behalf of financial institutions regulated by the OCC, Board, and FDIC. Type o f Review: New Collection. A ffected Public: Businesses or other for-profit. OCC N um ber o f Respondents: 120. Total A n n u a l Responses: 1,248. Frequency o f Response: Occasionally. Total A n n u a l Burden Hours: 2,184. Board N um ber o f R espondents: 100. Total A n n u a l Responses: 754. Frequency o f Response: Occasionally. Total A n n u a l Burden: 2,142. FDIC N um ber o f Respondents: 70. Total A n n u a l Responses: 523. Frequency o f Response: Occasionally. Total A n n u a l Burden Hours: 1,483. Comments Comments subm itted in response to this notice w ill be sum m arized and/or included in the request for OMB approval. All comm ents w ill become a m atter of public record. Comments are invited on: (a) W hether the collection of inform ation is necessary for the proper performance of the functions of the agency, including w hether the inform ation has practical utility; (b) The accuracy of the agency’s estimate of the burden of the collection of information; (c) Ways to enhance the quality, utility, and clarity of the inform ation to be collected; (d) Ways to m inim ize the burden of the collection on respondents, including through the use of autom ated collection techniques or other forms of inform ation technology; and (e) Estimates of capital or start-up costs and costs of operation, m aintenance, and purchase of services to provide information. 68842 Federal Register / Vol. 61, No. 251 / Monday, December 30, 1996 / Notice Dated: December 16, 1996. Karen Solomon, Director, Legislative and Regulatory Activities Division. By order of the Board of Governors of the Federal Reserve System, December 16,1996. William W. Wiles, Secretary o f the Board. By Order of the Board of Directors. Dated at Washington, D.C., this 11th day of December, 1996. Federal Deposit Insurance Corporation Jerry L. Langley, Executive Secretary. BILLING CODE 4810-33-P, 6210-01-P, 6714-01-P
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