A Banker’s Adventures in Brokerland: Looking Through Glass-Steagall at Discount Brokerage Services

Several banks have recently entered or announced their intention to enter the discount brokerage business, and the Federal Reserve Board is considering a rule listing discount brokerage as an acceptable bank holding company activity. The securities industry has contested this entry, asserting that the Glass-Steagall Act requires separation between investment and commercial banking. Though the Act does mandate some division between the two lines of business, this Note argues that bank discount brokerage services do not violate the Act. Part I examines the competing “accommodation” and “agency” interpretations of the relevant statutory sections, concluding that the agency interpretation, which permits bank discount brokerage operations, is superior. Part II scrutinizes this interpretation in light of the policies of the Glass-Steagall Act and concludes that allowing discount brokerage operations is consistent with the statutory goals. Part III considers fairness and investor protection concerns raised by the securities industry and recommends that bank regulations satisfy these concerns by requiring separate incorporation of bank discount brokerage services.