SUMMARY: The Federal Deposit Insurance Corporation (FDIC) published a
notice of proposed rescission of a rule in the Federal Register on May
16, 1997, which proposed to rescind its regulation entitled ``Insured
State Nonmember Banks Which Are Municipal Securities Dealers''. The
regulation requires insured state nonmember banks which are municipal
securities dealers to file with the FDIC certain information about
those persons who are or seek to be associated with these dealers as
municipal securities principals or municipal securities
representatives. The FDIC has determined for a number of reasons, as
set forth in the original notice and discussed in SUPPLEMENTARY
INFORMATION, that the regulation is unnecessary and duplicative, and
therefore, the FDIC is rescinding it.
EFFECTIVE DATE: The rescission of this regulation will be effective
December 16, 1999.
FOR FURTHER INFORMATION CONTACT: Amy A. Mitchell, Senior Capital
Markets Specialist, Division of Supervision (202) 898-3670, or Karen L.
Main, Counsel, Legal Division (202) 898-8838.
Part 343 of the FDIC's rules and regulations requires insured state
nonmember banks and certain of their subsidiaries, departments and
divisions which are municipal securities dealers, as defined in section
3(a)(30) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(30))
(Exchange Act), to file certain information with the FDIC. State
nonmember banks must file information about persons who are associated
with their subsidiaries, departments and divisions as municipal
securities principals or municipal securities representatives. The
Exchange Act delegates responsibility to the Municipal Securities
Rulemaking Board (MSRB) to formulate rules regulating the activities of
municipal securities dealers. The FDIC is authorized, pursuant to
section 3(a)(34)(A)(iii) of the Exchange Act, to enforce compliance
with MSRB rules by any insured state nonmember bank, as well as a
subsidiary or a department or a division thereof, which is a municipal
securities dealer (hereafter referred to as a state nonmember bank
municipal securities dealer).
One of the areas in which the Exchange Act directs the MSRB to
promulgate rules is the qualification of persons associated with
municipal securities dealers. Under paragraph (b) of MSRB Rule G-7,
persons who are or seek to be associated with municipal securities
dealers as municipal securities principals or municipal securities
representatives must provide certain background information and
conversely, the municipal securities dealers must obtain the
information from such persons. The FDIC, the Office of the Comptroller
of the Currency (OCC), and the Board of Governors of the Federal
Reserve System (FRB) (collectively, the Banking Agencies) developed
Form MSD-4 to satisfy this requirement. The FDIC requires state
nonmember bank municipal securities dealers to file Form MSD-4 with the
FDIC. 12 CFR 343.3(a).
Under paragraph (c) of MSRB Rule G-7, a person who is or seeks to
be associated with a municipal securities dealer is required to provide
the dealer with a statement correcting information furnished under
paragraph (b), to the extent that such information becomes materially
inaccurate or incomplete. The FDIC requires state nonmember bank
municipal securities dealers to file with the FDIC copies of MSRB Rule
G-7 paragraph (c) statements and Form MSD-5s. Form MSD-5, also
developed by the Banking Agencies, is a notification by a municipal
securities dealer that a municipal securities principal or a municipal
securities representative has terminated association with the dealer
and the reasons for such termination. 12 CFR 343.3 (b) and (c).
Paragraphs (e) and (f) of the MSRB Rule G-7 contain record
retention requirements. The FDIC has imposed substantially the same
requirements on state nonmember bank municipal securities dealers. 12
Paragraph (g) of the MSRB's Rule G-7 requires every bank municipal
securities dealer to file with the appropriate regulatory agency for
such bank dealer the information prescribed by the MSRB's Rule G-7, as
the appropriate regulatory agency shall require by rule or regulation.
As noted above, the FDIC requires that each state nonmember bank
municipal securities dealer file Form MSD-4, MSRB Rule G-7 paragraph
(c) statement, and Form MSD-5 with the FDIC for each person associated
with the dealer as a municipal securities principal or municipal
II. Basis for Rescission of Part 343
The reasons supporting the rescission of part 343 of the FDIC's
rules and regulations were thoroughly discussed in the original
proposal to rescind. (62 FR 26994, May 16, 1997). A summary of the most
compelling justifications are provided below.
A. MSRB's Rule G-7 Requires the Provision of Much of the Same
Information as Sec. 343.3
The requirements of Sec. 343.3 are largely duplicative of those
requirements in MSRB Rule G-7. Therefore, there is no need to retain
these redundant requirements in part 343 of the FDIC's rules and
regulations. Paragraph (b) of the MSRB's Rule G-7 requires bank
municipal securities dealers to obtain certain information from persons
who are or seek to be associated with them as municipal securities
principals or municipal securities representatives. Paragraph (c)
requires filing of statements to correct materially inaccurate or
incomplete information. MSRB's Rule G-7 paragraphs (e) and (f) provide
recordkeeping requirements, including that the information required in
paragraphs (b) and (c) be maintained for three years after the
associated person's employment with the municipal securities dealer or
broker has terminated.
In order to implement MSRB Rule G-7, the FDIC will continue to
provide the Forms MSD-4 and MSD-5 to state nonmember bank municipal
dealers. These forms will be reviewed by the FDIC during the regular
examination process. Section 15B(c)(5) of the Exchange Act authorizes
the FDIC to enforce MSRB regulations in accordance with section 8 of
the Federal Deposit Insurance Act (12 U.S.C. 1818).
B. The Number of Covered Entities is Declining
The FDIC has noted a steady decline in the number of state
nonmember bank municipal securities dealers over the last several
years. Withdrawal of several banks previously registered as bank
municipal securities dealers, as well as the consolidation of the
industry, has caused the number of state nonmember bank municipal
securities dealers to decline to 12. In the interests of efficiency and
reducing duplicative requirements for this very small number of covered
entities, the FDIC is rescinding its part 343 and relying on MSRB Rule
C. Implementing Regulations Are Not Required by the Exchange Act
Section 23(a)(1) of the Exchange Act states that the FDIC shall
have power ``to make such rules or regulations as may be necessary or
appropriate to implement the provisions of this title for which [it is]
responsible''. Although section 15B(b)(2)(A) of the Exchange Act
requires the MSRB to promulgate regulations addressing the
qualification of persons who are or seek to be associated with bank
municipal securities dealers, there is no corresponding statutory
requirement imposed upon the Banking Agencies, including the FDIC.
Therefore, the FDIC may exercise its discretion to determine whether it
is necessary or appropriate to adopt regulations such as part 343 or,
in this case, to decide that such a regulation is no longer necessary
D. Maintenance of Uniformity Among Banking Agencies
The FDIC undertook the review of part 343 of its rules and
regulations as part of a systematic review of its regulations and
written policies mandated by section 303(a) of the Riegle Community
Development and Regulatory Improvement Act of 1994 (CDRI) (12 U.S.C.
4803(a)). Section 303(a) of CDRI requires each of the Banking Agencies
to remove inconsistencies and outmoded and duplicative requirements
from its regulations and written policies. The FDIC has determined that
part 343 is duplicative of many of the requirements of the MSRB's Rule
Section 303(a)(2) of CDRI requires the FDIC to work jointly with
the other federal banking agencies to make uniform all regulations ``*
* * implementing common statutory or supervisory policies''. The
Banking Agencies will continue to take a uniform approach to this
substantive legal area, although the means of reaching that end is not
uniform. The FRB has rescinded its regulation, 12 CFR 208.8(j) (63 FR
37629, July 13, 1998); however, it intends that the applicable state
member banks which are municipal securities dealers will continue to
file the requisite reports and maintain the applicable records. (62 FR
15272, 15278, March 31, 1997). The OCC streamlined its regulation, 12
CFR part 10, by cross-referencing the relevant MSRB rules and deleting
certain redundant provisions (63 FR 29092, May 28, 1998). Therefore,
the Banking Agencies have succeeded in moving toward the objective
stated in section 303(a)(2) of CDRI as well as accomplishing the
overall goal of eliminating duplicative and unnecessary regulations.
III. Comments Received
The FDIC published its notice of proposed rescission in the Federal
Register on May 16, 1997 (62 FR 26994), and accepted comments through
July 15, 1997. No comments were received on the proposal.
IV. Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (44 U.S.C. 3501 et
seq.), the FDIC may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays
a currently valid Office of Management and Budget (OMB) control number.
The collection of information requirements contained in part 343 (Form
MSD-4, the MSRB Rule G-7(c) statement and Form MSD-5) have been
approved by OMB under control number 3064-0022 which expires August 31,
2002. The rescission of part 343 will not alter this collection. The
requirement under the MSRB's Rule G-7 that bank municipal securities
dealers collect the prescribed information from the persons who are or
seek to be associated with them as municipal securities principals or
municipal securities representatives still remains in effect.
V. Regulatory Flexibility Act
Under section 605(b) of the Regulatory Flexibility Act (RFA) (5
U.S.C. 605(b)), the regulatory flexibility analysis otherwise required
under section 604 of the RFA (5 U.S.C. 604) is not required if the head
of the agency certifies that the rule will not have a significant
economic impact on a substantial number of small entities and the
agency publishes such certification and a statement providing the
factual basis for such certification in the Federal Register along with
the final rule.
The FDIC estimates that, currently, there are 12 state nonmember
bank municipal securities dealers under its jurisdiction, none of which
have $100 million or less in assets. The rescission of part 343 would
result in the elimination of duplicative and unnecessary informational
requirements found in the FDIC's regulation and allow the covered
entities to refer to the MSRB's Rule G-7 requirements instead.
Basically, the state nonmember bank's reporting and recordkeeping
obligations will remain the same. Thus, the FDIC Board of Directors
hereby certifies that the rescission of part 343 of its rules and
regulations will not have a significant economic impact on a
substantial number of small entities within the meaning of the RFA.
Therefore, the provisions of the RFA regarding a final regulatory
flexibility analysis (Id. At 604) do not apply here.
VI. Small Business Regulatory Enforcement Fairness Act
The Office of Management and Budget has determined that this rule
is not a ``major rule'' within the meaning of the relevant sections of
the Small Business Regulatory Enforcement Fairness Act of 1996
(SBREFA), 5 U.S.C. 801, et seq. As required by SBREFA, the FDIC will
file the appropriate reports with Congress and the General Accounting
Office so that the rescission of part 343 can be reviewed.
VII. Assessment of Impact of Federal Regulation on Families
The FDIC has determined that the rescission of this rule will not
affect family well-being within the meaning of section 654 of the
Treasury and General Government Appropriations Act, 1999, Public Law
105-277, 112 Stat. 2681 (1998).
List of Subjects in 12 CFR Part 343
Banks, banking, Reporting and recordkeeping requirements,
Under the authority of 12 U.S.C. 1819(a) (Tenth), the Board of
Directors of the Federal Deposit Insurance Corporation hereby removes
part 343 of title 12 of the Code of Federal Regulations.
PART 343--[REMOVED AND RESERVED]
1. Part 343 is removed and reserved.
By Order of the Board of Directors.
Dated at Washington, D.C. this 8th day of November, 1999.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
[FR Doc. 99-29853 Filed 11-15-99; 8:45 am]
BILLING CODE 6714-01-P