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December 1, 1999

Washington Watch: The End of Glass-Steagall

By William Hoffman

The Financial Services Act of 1999 is the single most important piece of securities, banking, and insurance industry legislation passed by Congress since the Great Depression. Among the provisions, the bill:

* Repeals restrictions on bank holding companies in the Glass-Steagall Act, and amends the Bank Holding Company Act of 1956 to allow mergers and acquisitions among banks and securities firms and insurance companies, subject to regulatory review.

* Permits new financial holding companies-potentially, merged banks, securities firms, and insurance companies-to engage in securities underwriting, dealing, and market making, without revenue limitation.

* Allows financial holding companies to acquire or control ownership interests (including debt and equity securities, partnership interests, trust certificates, etc.) in any trade or business.

* Affirms state securities commissions regulators'authority over securities and securities brokers, dealers, and investment advisors and their associates, provided state actions do not prevent affiliations contemplated in the law.

* Exempts banks acting as trustees or fiduciaries from federal securities registration if the bank is chiefly compensated by administrative and other fees, and does not publicly solicit brokerage business.

* Amends the Investment Advisers Act and the Investment Company Act to place banks that advise mutual funds under the same regulatory regime as other mutual fund advisers.