WASHINGTON – Several prominent Senators are miffed that the SEC, they claim, is not working closely enough with bank regulatory agencies on a proposal that would extend a number of broker-dealer exemptions to banks and credit unions. In a March 4 letter to SEC Chairman William Donaldson, 14 legislators called Regulation B "fundamentally inconsistent with Congressional intent and would impose burdensome and wholly unjustifiable compliance costs on the entire banking industry. "Regulation B would extend exemptions to credit unions that include engaging in third-party networking, sweep accounts and trust and fiduciary services without having to register with the SEC as broker-dealers. The letter was endorsed by Sen. Jim Bunning (R-Ky.); Sen. Michael Enzi (R-Wyo.); Sen. Tim Johnson (D-S.D.); Sen. Debbie Stabenow (D-Mich.); Sen. Thomas Carper (D-Del.); Sen. Michael Crapo (R-Idaho); Sen. Robert Bennett (R-Utah); Sen. Wayne Allard (R-Colo.); Sen. Rick Santorum (R-Pa.); Sen. Chuck Hagel (R-Neb.); Sen. Elizabeth Dole (R-N.C.); Sen. Charles Schumer (D-N.Y.); Sen. John Sununu (R-N.H.); and Sen. Mel Martinez (R-Fla.). "We strongly urge the Commission not to finalize the proposed regulation in its current form but instead to prepare and again seek public comment on a new proposal that is consistent with the language and legislative history of Gramm-Leach-Bliley Act (GLBA)," the legislators wrote in the March 4 letter. The Senators are not alone in their concerns with Regulation B. In October 2004, the Federal Reserve Board, the FDIC and OCC jointly attacked the SEC's broker/dealer exemption proposal concerned that it conflicts with existing regulations and may be a cumbersome waste of time, energy and expense. The American Bankers Association and its ABA Securities Association have expressed disdain in a series of meetings and through letters with the SEC over its proposal, specifically in the areas of custody, trust and fiduciary exemptions. All of the Senators urged the SEC to jointly work with the bank regulatory agencies and to consult with President Bush's Working Group on Financial Markets before issuing the proposal to the public for final comment. The GLBA repealed the blanket exclusion for banks under the definitions of broker and dealer in the Securities Exchange Act of 1934, the legislators wrote. But GLBA's intent was to allow banks to continue performing certain traditional banking activities involving the purchase and sale of securities."We replaced that exclusion with a series of statutory exceptions to the broker and dealer definitions. In so doing, it was our intention, clearly expressed in the legislative history of GLBA, that these bank products and services continue to be available to bank customers and that banks continue to engage in these activities without having to seek additional authorization from the Commission. Indeed, that was the very purpose of adopting statutory exceptions," the letter read. Instead, Regulation B "would create a new regulatory maze of requirements that would impose unnecessary burdens on and in some cases prevent banks and thrifts that seek to continue to offer their customers those very same traditional bank products and services we sought so explicitly to protect in (the GLBA)," they wrote. Of pressing concern, according to the legislators, is the notion that banks and thrifts may not have a broker-dealer option for their customers if Regulation B is finalized in its current form. "With no affiliate to which they could readily "push out" these activities, many of these institutions would likely choose to stop offering to their customers the traditional products and services protected by (GLBA)," the Senators expressed. "Others might decide to incur the very significant costs associated with registering as a broker, which would require passing those costs on to their customers." The creation of GLBA was not intended to "push out" broker-dealer activities, the letter to the SEC said. [email protected]