Securities and Investment Activities of Banks

The statutory provisions most relevant to the securities and investment activities of banks are summarized, and recent developments surrounding these activities are reviewed. During the past few years, financial institutions have been offering more brokerage and securities services to their retail and institutional customers. The Glass-Steagall Act (GSA) is the law that most directly restricts the securities activities of commercial banks. The courts have not addressed directly the extent to which national banks are permitted to combine investment advisory services with discount brokerage. The Office of the Comptroller of the Currency has permitted investment advisory services to be combined somewhat with discount brokerage. Prior to passage of the Competitive Equality Banking Act of 1987 (CEBA), state-chartered nonmember banks were not prohibited under the GSA from affiliating with a securities firm or from establishing or acquiring a securities affiliate. CEBA imposed a moratorium until March 1, 1988, on certain nonbanking activities.