Exemptions for Banks from Government Securities Act Custodial Regulations
Question
When is it possible for a bank to be exempted from compliance with some of the Government Securities Act custodial regulations?
Answers
Explanations
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A. B. C. D.B
Under the Government Securities Act (GSA), banks that engage in government securities activities are subject to various regulatory requirements related to custody and control of government securities. These requirements are designed to ensure the safekeeping of government securities and to prevent fraud and misappropriation.
However, there are certain exemptions available under the GSA that may allow a bank to be exempted from compliance with some of the custodial regulations. One such exemption is provided under Section 15C(a)(3)(B) of the GSA, which states that a bank need not comply with the custodial regulations if it meets certain criteria.
To qualify for this exemption, the bank must meet all of the following conditions:
The bank maintains its securities in the ordinary course of business, and not for the purpose of evading the custodial regulations.
The bank does not hold itself out as a government securities broker or dealer.
The bank has procedures in place to ensure compliance with the custodial regulations of its federal regulatory agency.
The bank uses more than the normal standard of care when maintaining possession and control of securities.
In other words, a bank can be exempted from compliance with the custodial regulations if it engages in government securities activities as part of its normal business activities, and not as a broker or dealer. The bank must also have procedures in place to ensure compliance with the regulations of its federal regulatory agency, and must use more than the normal standard of care when maintaining possession and control of securities.
It is important to note that while this exemption may relieve a bank from some of the custodial regulations, it does not exempt the bank from all regulatory requirements related to government securities activities. Therefore, it is essential for banks to ensure that they fully understand the regulatory requirements applicable to their activities and take appropriate measures to comply with those requirements.
