U.S. Securities and Exchange Commission chairman Christopher Cox announced that the SEC hopes to have rules in place by the end of the year that will define when banks can engage in securities business without being registered as a broker.

The announcement follows this week’s expected passage of the Financial Services Regulatory Relief Act of 2006 by both houses of Congress. Cox hopes to complete work by year end on proposed new rules to implement the bank broker provisions of the Gramm-Leach-Bliley Act.

”With the expectation that proposed new rules will be issued by December 31, 2006, the commission today extended the current exemption from the definition of ‘broker’ until January 15, 2007,’ Cox added. “This will give the commission and the banking regulators time to complete the rule-writing and propose new rules before the exemption expires.”

After passage of Gramm-Leach-Bliley, banks’ ability to engage in securities activities without registering as a broker or dealer depends on their coming within more narrowly tailored exceptions. Those exceptions were to have become effective in 2001, but the commission adopted interim rules that postponed full compliance, and through a series of orders extended banks’ exemption from the definition of “broker” to Sept. 30, 2006. It is this exemption that today’s action further extends until January 2007.

Under the provisions of the Regulatory Relief Act, the SEC and the Federal Reserve have 180 days from the date the president signs the bill into law to jointly propose final rules. “I am very confident that we will meet the new legislative deadline,” said Cox, “and it is our intention to do so by year end, well ahead of schedule. Over the past six months, the SEC, the Federal Reserve, the FDIC, and the Comptroller of the Currency have been working at the highest levels to put these needed clarifications in place. We are already well along in that process.”

If the new rules are proposed with a 90-day comment period beginning at year end, final rules could be expected in late spring or early summer 2007. “Because we recognize that banks will need time to implement systems to ensure compliance with the new bank broker provisions,” Cox said, “we expect any final rules would have a delayed effective date.”