PNC Bank 2013 Annual Report Download - page 29

authority, the CFPB is continuing its ongoing examination and
supervisory activities with respect to a number of consumer
businesses and products.
S ECURITIES AND D ERIVATIVES R EGULATION
Our registered broker-dealer and investment adviser
subsidiaries are subject to rules and regulations promulgated
by the SEC.
Several of our subsidiaries are registered with the SEC as
investment advisers and may provide investment advisory
services to clients, other PNC affiliates or related entities,
including registered investment companies. Certain of these
advisers are registered as investment advisers to private equity
funds under rules adopted under Dodd-Frank.
Broker-dealer subsidiaries are subject to the requirements of
the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder. The Financial Industry
Regulatory Authority (FINRA) is the primary self-regulatory
organization (SRO) for our registered broker-dealer
subsidiaries. Investment adviser subsidiaries are subject to the
requirements of the Investment Advisers Act of 1940, as
amended, and the regulations thereunder. An investment
adviser to a registered investment company is also subject to
the requirements of the Investment Company Act of 1940, as
amended, and the regulations thereunder. Our broker-dealer
and investment adviser subsidiaries also are subject to
additional regulation by states or local jurisdictions.
Over the past several years, the SEC and other regulatory
agencies have increased their focus on the mutual fund and
broker-dealer industries. Congress and the SEC have adopted
regulatory reforms and are considering additional reforms that
have increased, and are likely to continue to increase, the
extent of regulation of the mutual fund and broker-dealer
industries and impose additional compliance obligations and
costs on our subsidiaries involved with those industries. Under
provisions of the federal securities laws applicable to broker-
dealers, investment advisers and registered investment
companies and their service providers, a determination by a
court or regulatory agency that certain violations have
occurred at a company or its affiliates can result in fines,
restitution, a limitation on permitted activities, disqualification
to continue to conduct certain activities and an inability to rely
on certain favorable exemptions. Certain types of infractions
and violations can also affect a public company in its timing
and ability to expeditiously issue new securities into the
capital markets. In addition, certain changes in the activities of
a broker-dealer require approval from FINRA, and FINRA
takes into account a variety of considerations in acting upon
applications for such approval, including internal controls,
capital levels, management experience and quality, prior
enforcement and disciplinary history and supervisory
concerns.
Title VII of Dodd-Frank imposes new comprehensive and
significant regulations on the activities of financial institutions
that are active in the U.S. over-the-counter (“OTC”)
derivatives and foreign exchange markets. Title VII was
enacted to (i) address systemic risk issues, (ii) bring greater
transparency to the derivatives markets, (iii) provide enhanced
disclosures and protection to customers, and (iv) promote
market integrity. Among other things, Title VII: (i) requires
the registration of both “swap dealers” and “major swap
participants” with one or both of the CFTC (in the case of non
security-based swaps) and the SEC (in the case of security-
based swaps); (ii) requires that most standardized swaps be
centrally cleared through a regulated clearing house and
traded on a centralized exchange or swap execution facility;
(iii) subjects swap dealers and major swap participants to
capital and margin requirements in excess of historical
practice; (iv) subjects swap dealers and major swap
participants to comprehensive new recordkeeping and real-
time public reporting requirements; (v) subjects swap dealers
and major swap participants to new business conduct
requirements, including the provision of daily marks to
counterparties and disclosing to counterparties (pre-execution)
the material risks, material incentives, and any conflicts of
interest associated with their swap; and (vi) imposes special
duties on swap dealers and major swap participants when
transacting a swap with a “special entity” (e.g., governmental
agency (federal, state or local) or political subdivision thereof,
pension plan or endowment).
Based on the definition of a “swap dealer” under Title VII,
PNC Bank, N.A. registered with the CFTC as a swap dealer
on January 31, 2013. As a result thereof, PNC Bank, N.A. is
subject to the regulations and requirements imposed on
registered swap dealers, and the CFTC will have a meaningful
supervisory role with respect to PNC Bank, N.A.’s derivatives
and foreign exchange businesses. Because of the limited
volume of our security-based swap activities, PNC Bank, N.A.
has not registered with the SEC as a security-based swap
dealer. The regulations and requirements applicable to swap
dealers will collectively impose implementation and ongoing
compliance burdens on PNC Bank, N.A. and will introduce
additional legal risks (including as a result of newly applicable
antifraud and anti-manipulation provisions and private rights
of action).
In addition, an investment adviser to private funds or to
registered investment companies may be required to register
with the CFTC as a commodity pool operator. Registration
could impose significant new regulatory compliance burdens.
Presently, we expect our subsidiaries that serve as investment
advisers to such entities to be eligible for exemptions from
registration as a commodity pool operator.
BlackRock has subsidiaries in securities and related
businesses subject to SEC, other governmental agencies, state,
local and FINRA regulation, and a federally chartered
nondepository trust company subsidiary subject to supervision
The PNC Financial Services Group, Inc. – Form 10-K 11