July 7, 2008 / 4:48 PM / 11 years ago

FACTBOX-Details of Fed, SEC investment bank agreement

(Reuters) - The Federal Reserve and Securities and Exchange Commission agreed on Monday to share information about investment and commercial banks.

The Fed has supervisory oversight of bank holding companies and financial holding companies, while the SEC regulates securities companies including brokers, dealers and investment companies. The SEC also has oversight of the four largest investment banks — Goldman Sachs (GS.N), Lehman Brothers LEH.N, Merrill Lynch MER.N and Morgan Stanley (MS.N), which are known as consolidated supervised entities (CSEs).

Key points of the 10-page agreement include the following:

* Cooperation will include sharing information, coordinating examinations and visits, consulting on supervisory expectations “and other matters of common regulatory and supervisory interest” by the Fed and SEC.

* The SEC will give the Fed information and analysis of financial condition, risk management systems, internal controls and capital, liquidity and funding resources of the CSEs and primary dealers. The Fed will provide the same information it develops in assessing the CSEs.

* The Fed will give the SEC information about securities financing markets and the Fed’s assessment of conditions in those markets that may materially affect the operations or financial condition of the CSEs, bank holding companies or primary dealers.

* The Fed will give the SEC analysis about the financial condition, risk management systems, internal controls and capital, liquidity and funding resources of the bank holding companies that affect their broker or dealer subsidiaries or their ability to meet certain net capital standards.

* The Fed and SEC will meet at least quarterly each year to identify and share information about regulatory and supervisory issues related to CSEs and bank holding companies.

* The Fed and SEC will cooperate in setting supervisory and regulatory “expectations, guidelines or rules” concerning capital, liquidity, funding resources and risk management systems of CSEs and primary dealers.

* The Fed and SEC will collaborate and share non-public information about the Depository Trust Co, National Securities Clearing Corp and the Fixed Income Clearing Corp, as set out in previous letter agreements between the Fed and SEC.

* If either the Fed or the SEC identifies a significant violation of anti-money laundering regulations by a company, it will promptly notify the other.

* The agreement does not create legally binding obligations on the Fed or SEC, and does not give any third party the right to suppress or exclude information requested by regulators.

* The agreement complements, but does not alter, existing bilateral or multilateral cooperation arrangements for supervision or enforcement issues between the Fed and SEC. Both regulators will encourage their staffs to maintain ad hoc communications to coordinate daily operations.

* The Fed and SEC will periodically review the agreement to see if it needs to be expanded or altered.

Reporting by Julie Vorman; Editing by Leslie Adler

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