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Abstract

Under the current regulatory scheme, banks directly engaged in mutual fund activities are regulated under the federal banking laws by the Office of the Comptroller of the Currency, whereas bank subsidiaries and non-bank affiliates engaged in mutual fund activities must be registered broker-dealers that are subject to Securities and Exchange Commission regulation under the federal securities laws. The regulatory tools provided to the banking regulators by the federal banking laws were designed to provide for the protection of depositors and for the safety and soundness of the bank. The remedies available under the federal banking laws dealing with violations involving the sales of securities, however, are not as comprehensive as those available under the federal securities laws. Mr. Caldarelli contends, in this very comprehensive Article, that while previous efforts to allow for functional regulation of securities have failed, the time is right to give the Securities and Exchange Commission the authority to regulate all securities activities regardless of whether the entity engaging in the activities is a bank or a securities firm. In conclusion, Mr. Caldarelli argues that because of several pivotal reasons the bank exclusion from the statutory provision of the federal securities laws defining "broker/ dealer" and "investment adviser" should be eliminated, which, in effect, would result in the Securities and Exchange Commission obtaining functional regulation of all participants in the securities markets.

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