Beware Banker Securities Blunders

By Horn, Charles M. | ABA Banking Journal, August 1990 | Go to article overview

Beware Banker Securities Blunders

Horn, Charles M., ABA Banking Journal

A former federal regulator answers common questions about banks' own securities and other securities that they sell

Just as bank securities activities have been growing, so has the interest of regulators and legislators. This interest has prompted bank organizations to become more sensitive to the need for sound securities compliance systems.

Banks obviously want to avoid government-and private-liability. A bewildering array of laws, regulations, and policies govern bank securities activities. Banks should be aware, for example, that violations of federal securities laws and rules can be subject to penalties under the Financial Institutions Reform, Recovery and Enforcement Act.

Here are some questions bankers frequently ask about securities compliance.

Q. What are the most sensitive areas in bank securities compliance?

A. Today's political and regulatory environment mean that all areas of bank securities activities are sensitive. However, events of the past few years have underscored the need for banks to be particularly careful in the areas of capital raising; regulatory and shareholder reporting; insider trading; and high-risk investment activities.

Q. Banks are under increased pressure to raise capital. Public markets are one source of capital. What trouble spots should banks avoid?

A. There is an obvious need to make full and accurate disclosure in the documents through which you offer securities. Apart from that, be sensitive to the fact that the new regulatory environment may delay the bringing of securities to market in an expeditious fashion.

The Securities and Exchange Commission, for instance, will be reviewing more closely the registration statements of bank holding companies, in part because it is in this process that the SEC can be proactive in promoting "full disclosure."

SEC staff will turn to bank regulators for assistance in ensuring that these documents do not omit significant financial and regulatory information by asking these agencies to independently review the documents. This process will delay bringing securities to market, which can create problems for a banking organization wanting to take advantage of favorable-but temporary-market conditions.

Q. What can an organization do to avoid such delays?

A. One alternative-especially for larger organizations-is the Rule 415 "shelf registration" process.

By having an issue "on the shelf" and ready to go, a bank "preclears" an offering through SEC and resolves potential disclosure problems in advance. However, be aware that some securities subject to Rule 415 must be sold within two years of the initial effective date of the registration.

There's another, newer alternative too. With SEC's recent adoption of Rule 144A for "private resales," the secondary market for privately placed securities is expected to increase the liquidity-and hence the attractiveness-of these kinds of securities. Therefore some banking organizations may wish to tap private capital markets, rather than make a public offering.

Q. SEC is currently engaged in major efforts to "target" the regulatory reports (such as annual reports, periodic reports, and proxy solicitation materials) of banks for review (ABA BJ, June, p.12). What is SEC looking for?

A. SEC will focus heavily on disclosures concerning the quality of bank loan loss reserves and bank loan portfolio management methods, investment portfolio activities, known trends and contingencies in the management's discussion and analysis, and information relating to insider and affiliate transactions.

Q. What securities regulatory risks are posed by bank investment activities?

A. The principal federal risk for publicly traded banking organizations is not adequately disclosing to regulators and shareholders the financial statement impact and business risks of high-risk investments. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Beware Banker Securities Blunders


Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

    New feature

    It is estimated that 1 in 10 people have dyslexia, and in an effort to make Questia easier to use for those people, we have added a new choice of font to the Reader. That font is called OpenDyslexic, and has been designed to help with some of the symptoms of dyslexia. For more information on this font, please visit

    To use OpenDyslexic, choose it from the Typeface list in Font settings.

    OK, got it!

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search


    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.