Ruder Promises ‘Tough Cop’ Attitude : SEC Head Asks for Jurisdiction if Banks Enter Securities Business

Securities and Exchange Commission Chairman David S. Ruder pledged Wednesday that his agency would adopt a “tough cop” attitude toward banks if Congress permits them to engage in a full range of securities activities.

Ruder, testifying before a House Banking subcommittee, said the SEC would not support the full-fledged entry of banks into the securities business unless Congress gives the agency jurisdiction over most of those activities.

In response to a question from Rep. Frank Annunzio (D-Ill.), Ruder pledged that securities firms affiliated with banks would get as much scrutiny as other securities firms.

“I need to know if you’re going to be tough with the banks or wave a powder puff,” Annunzio said.

“We have a reputation we liken to a tough cop,” Ruder replied. “I would certainly say that we would treat a bank securities affiliate with the same tough cop attitude that we would with regard to any securities operation.”

Legislators are considering whether to repeal the 1933 Glass-Steagall Act, which separates commercial banks from the securities industry. The Senate Banking Committee is considering three bills expanding bank powers. House Banking Committee Chairman Fernand J. St Germain (D-R.I.) has said that he intends to begin reviewing specific legislation by March.

Ruder said he prefers the approach, advocated by Senate Banking Committee Chairman William Proxmire (D-Wis.), who would permit banks and securities firms to affiliate under a parent holding company.

However, he said none of the three Senate bills adequately addressed the question of the SEC’s power.

Banks now can conduct retail brokerage and some other activities in a bank unit not subject to SEC regulation. Ruder said banks should be required to transfer old as well as new securities activities, such as corporate underwriting, into an affiliate overseen by the agency.

SEC staff members are working with Senate aides and federal bank regulators to work out a compromise on the issue, he said.

Rep. Charles E. Schumer (D-N.Y.) cautioned Ruder that “every regulator who comes before us seems to have (a) plan that expands their own power.

“The committee (will) have . . . to take some of these regulators’ position with some of that in mind, that everyone is out to expand their own turf.”

But Ruder said the provision he advocates is appropriate because of the SEC’s “special expertise in the area of investor protection.”

“We frankly don’t think that the bank regulators have enough experience, or perhaps enough willpower, to regulate in the investor protection area,” he said.

Without the provision, repeal of Glass-Steagall “would exacerbate present regulatory disparities,” he said.