Regions Bank 2010 Annual Report Download - page 33

a sanctioned country; and (ii) a blocking of assets in which the government or specially designated nationals of
the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including
property in the possession or control of U.S. persons). Blocked assets (e.g., property and bank deposits) cannot be
paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with
these sanctions could have serious legal and reputational consequences.
Regulation of Insurers and Insurance Brokers
Regions’ operations in the areas of insurance brokerage and reinsurance of credit life insurance are subject
to regulation and supervision by various state insurance regulatory authorities. Although the scope of regulation
and form of supervision may vary from state to state, insurance laws generally grant broad discretion to
regulatory authorities in adopting regulations and supervising regulated activities. This supervision generally
includes the licensing of insurance brokers and agents and the regulation of the handling of customer funds held
in a fiduciary capacity. Certain of Regions’ insurance company subsidiaries are subject to extensive regulatory
supervision and to insurance laws and regulations requiring, among other things, maintenance of capital, record
keeping, reporting and examinations.
Regulation of Morgan Keegan
Morgan Keegan is subject to regulation and examination by the SEC, FINRA, NYSE and other SROs. Such
regulations cover a broad range of subject matter. Rules and regulations for registered broker-dealers cover such
issues as: capital requirements; sales and trading practices; use of client funds and securities; the conduct of
directors, officers and employees; record-keeping and recording; supervisory procedures to prevent improper
trading on material non-public information; qualification and licensing of sales personnel; and limitations on the
extension of credit in securities transactions. Rules and regulations for registered investment advisers include
limitations on the ability of investment advisers to charge performance-based or non-refundable fees to clients,
record-keeping and reporting requirements, disclosure requirements, limitations on principal transactions
between an adviser or its affiliates and advisory clients, and anti-fraud standards.
Morgan Keegan is subject to the net capital requirements set forth in Rule 15c3-1 of the Securities Exchange
Act of 1934. The net capital requirements measure the general financial condition and liquidity of a broker-dealer
by specifying a minimum level of net capital that a broker-dealer must maintain, and by requiring that a
significant portion of its assets be kept liquid. If Morgan Keegan failed to maintain its minimum required net
capital, it would be required to cease executing customer transactions until it came back into compliance. This
could also result in Morgan Keegan losing its FINRA membership, its registration with the SEC or require a
complete liquidation.
The SEC’s risk assessment rules also apply to Morgan Keegan as a registered broker-dealer. These rules
require broker-dealers to maintain and preserve records and certain information, describe risk management
policies and procedures, and report on the financial condition of affiliates whose financial and securities activities
are reasonably likely to have a material impact on the financial and operational condition of the broker-dealer.
Certain “material associated persons” of Morgan Keegan, as defined in the risk assessment rules, may also be
subject to SEC regulation.
In addition to federal registration, state securities commissions require the registration of certain broker-
dealers and investment advisers. Morgan Keegan is registered as a broker-dealer with every state, the District of
Columbia, and Puerto Rico. Morgan Keegan is registered as an investment adviser in over 40 states and the
District of Columbia.
Violations of federal, state and SRO rules or regulations may result in the revocation of broker-dealer or
investment adviser licenses, imposition of censures or fines, the issuance of cease and desist orders, and the
suspension or expulsion of officers and employees from the securities business firm.
19