On May 30, the Federal Reserve Board approved a final rule outlining the procedures for securities holding companies (SHCs) to elect to be supervised by the Federal Reserve. An SHC is a nonbank company that owns at least one registered broker or dealer. In effect, the rule provides a way for U.S.-based companies to show foreign regulators that the firm is indeed a regulated entity in the U.S.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) eliminated the previous supervision framework that applied to SHCs under the Securities and Exchange Commission and permitted SHCs to be supervised by the Federal Reserve. An SHC may seek supervision by the Federal Reserve to meet requirements by a regulator in another country that the firm be subject to comprehensive, consolidated supervision in the United States in order to operate in the country.
The final rule specifies the information that an SHC will need to provide to the Federal Reserve as part of registration for supervision, including information related to organizational structure, capital, and financial condition. Under the final rule, an SHC’s registration becomes effective no later than 45 days from the date the Federal Reserve receives all required information.
The final rule provides that upon an effective registration, an SHC would be supervised and regulated as if it were a bank holding company. However, consistent with the Dodd-Frank Act, the restrictions on nonbanking activities in the Bank Holding Company Act would not apply to a supervised SHC.
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