Seal of the Board of Governors of the Federal Reserve System
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.  20551
DIVISION OF BANKING
SUPERVISION AND REGULATION
SR 04-7
May 14, 2004

TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK AND TO CERTAIN DOMESTIC AND FOREIGN BANKING ORGANIZATIONS SUPERVISED BY THE FEDERAL RESERVE
SUBJECT:  SEC Guidance on the Potential Liability of Financial Institutions for Securities Law Violations Arising from Deceptive Structured Finance Products and Transactions

The Federal Reserve is issuing this SR letter to provide regulated financial institutions with a copy of the attached letter from the Division of Market Regulation at the Securities and Exchange Commission (SEC) to the Federal Reserve and the Office of the Comptroller of the Currency, dated December 4, 2003. The letter includes a memorandum that discusses the principal types of Federal securities law violations that may arise when a company uses structured finance products in a deceptive manner. The memorandum also discusses the SECís views regarding when a financial institutionís participation in a structured finance transaction may create liability for the institution under the Federal securities laws and the statutory bases for such potential liability.

The Federal Reserve Banks are asked to provide a copy of this SR letter and the attachment to domestic and foreign banking organizations engaged in complex structured finance activities or similar activities. Please be advised that the SEC letter and guidance are referenced in the Draft Interagency Statement on Sound Practices Concerning Complex Structured Finance Activities that the Federal Reserve along with the other Federal banking agencies and the SEC issued today for public comment.1

Questions concerning this matter may be directed to Sabeth Siddique, Manager, Credit Risk, at (202) 452-3861 or Walt Miles, Assistant Director, at (202) 452-5264 in the Division of Banking Supervision and Regulation and Kieran Fallon, Managing Senior Counsel, at (202) 452-5270 in the Legal Division

 

Richard Spillenkothen
Director


Attachment:
Guidance on the Potential liability of Financial Institutions for Securities Law Violations Arising from Deceptive Structured Finance Products and Transactions (821 KB PDF)

Notes:
  1. The press release for the draft interagency statement can be found on the Boardís website at http://www.federalreserve.gov/boarddocs/press/bcreg/2004/.  Return to text
SR letters | 2004
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