(The news featured below is a selection from the news covered in the Federal Securities Report Letter, which is distributed to subscribers of the Federal Securities Law Reports.)

Consolidated Broker-Dealer Supervision Framework Adopted

The framework for voluntary group-wide supervision of broker-dealer holding companies includes a program for consolidated supervised entities, or CSEs, or for supervised investment bank holding companies, known as SIBHCs. In each case, SEC supervision would include recordkeeping, reporting and examination requirements.

Broker-dealers that participate in the CSE program may use an alternative risk-based approach to satisfy the SEC's net capital requirements. A CSE that does not have a principal regulator may rely on the SEC's group-wide supervision to satisfy the European Union's regulatory requirements for consolidated supervision. A CSE would provide the SEC with computations of allowable capital and risk allowances that are consistent with the Basel standards.

The SIBHC framework implements a provision of the Gramm-Leach-Bliley Act. It is available to broker-dealer holding companies that are not affiliated with banks or thrifts. This framework is also expected to enable the SIBHC to satisfy the European Union directive on consolidated supervision and to be consistent with the Basel standards on capital and risk.

The universe of potential voluntary firms is only about 10 to 12, and 5 of these are not affiliated with banks, according to Annette Nazareth, the director of the Division of Market Regulation. The staff is aware of some interest in the CSE framework, but has not heard from anyone that is interested in the SIBHC framework, she said. The staff is still awaiting the EU's determination on whether it will accept the SEC's voluntary frameworks as equivalent to the EU directive on consolidated supervision. The new programs take effect in 60 days.

¨ The adopting release will be published in a forthcoming REPORT