The Federal Reserve Board (the "FRB") and the Securities and Exchange Commission ("SEC") have entered into a Memorandum of Understanding ("MOU") providing for collaboration between the two agencies in areas of mutual supervisory interest. The MOU establishes a framework for coordinated regulation and information sharing between the FRB and the SEC, and is intended to enhance financial market stability, as well as to allow for more efficient regulation by both agencies. The MOU provides that:
- The agencies will coordinate supervision and regulation in areas of common interest, including bank brokerage activities and anti-money laundering. In addition to sharing information, the collaboration also will include coordination of examinations and visitations, periodic meetings, and consultations on matters of common interest.
- The agencies will each inform the other of any issues which may affect the regulatory interests of the other, and provide the other with information regarding holding companies and bank holding companies, including their financial condition, internal controls, and funding sources. Both agencies will share information and analysis regarding primary dealers and their holding companies and coordinate with each other in obtaining and analyzing information related to such entities, establishing applicable guidelines or rules, and monitoring compliance.
- The FRB and the SEC will share information, including information that is non-public, relating to the Depository Trust Company, its affiliates, and transfer agents. They will also collaborate on anti-money laundering issues, with each agency to notify the other when a violation of the Bank Secrecy Act and related regulations is identified.
The MOU also establishes procedures for implementing and applying the Regulation R exemption from broker-dealer registration for banks engaging in brokerage activities. Any rules which are needed to implement the exemption are to be adopted jointly, as well as related interpretations and responses to no-action requests.
Although each agency will now have greater access to information concerning financial entities over which it traditionally did not have primary oversight, the MOU does not grant either agency any new authority, nor does it modify the existing supervisory powers and responsibilities of each agency. By formalizing procedures for coordination, the MOU is intended to allow the FRB and SEC to better carry out their regulation of the financial markets. The MOU also seems to signal a move towards a more centralized regulatory system with the FRB acting as the primary regulator, consistent with the long-term recommendations outlined in the Treasury Department's blueprint for financial reform.