Court Calls SEC Rule on Banks Illegal

The U.S. Court of Appeals ruled Tuesday that the Securities and Exchange Commission does not have authority to regulate banks as “broker-dealers.”

A three-member appellate court panel, in reversing U.S. District Judge Gerhard A. Gesell, said an SEC rule enacted last year is illegal. “We find these statutory sections on which the district court relied inadequate to support the SEC’s attempt to amend by regulation the explicit statutory provisions that govern the division of responsibility and jurisdiction between the SEC and banking regulatory agencies,” the appeals court said. The panel said Gesell should enjoin the SEC from using the rule against the members of the American Banking Assn., which brought the suit.