C.M.R. 02, 032, ch. 506 - FINANCIAL INSTITUTIONS AND BROKER-DEALERS ENGAGING IN THIRD PARTY BROKERAGE ARRANGEMENTS

HISTORICAL SUMMARY:

On June 1, 1994, the Bureau of Financial Institutions ("the Bureau") issued Regulation 29, Securities Activities in Financial Institutions, and the Office of Securities ("the Office") issued Rule 506, Broker-Dealers Transacting Business on the Premises of Financial Institutions. Since that date, there have been a number of changes in both state and federal law regarding securities activities by financial institutions. Federal legislation, the Gramm-Leach-Bliley Act of 1999 ("GLB"), repealed the long-standing prohibitions in federal banking law on mixing banking and securities activities. GLB also removed provisions of federal law that exempted financial institutions from broker-dealer registration and from many broker-dealer regulations. One of the exemptions that GLB did retain was for third party broker-dealer networking arrangements that allow financial institutions to enter into agreements with registered broker-dealers to offer securities transactions to customers of the financial institution and pay compensation to the financial institution without a requirement that the financial institution register as a broker-dealer. In 2000, the Revised Maine Securities Act was amended to incorporate some of the broker-dealer registration exemptions of GLB, including the exemption for third party broker-dealer networking arrangements. This exemption remains in force under the Maine Uniform Securities Act ("the Act"), effective on December 31, 2005.