At the Bell

Friedman Billings gets OK to buy bank

* Friedman Billings Ramsey & Co. Inc., an investment bank in Arlington, Va., received approval last week from the Federal Reserve to buy a nearby retail bank.

The go-ahead makes FBR the first company with significant merchant and investment banking activity to take advantage of the Gramm-Leach-Bliley Act of 1999, which allows securities companies to become bank holding companies.

The approval comes more than a year after Friedman announced plans to buy the parent company of Rushmore Trust and Savings of Bethesda, Md. The $27.2 million acquisition will add $920 million in assets under management to FBR’s $800 million.

Court says viaticals qualify as securities

* A district judge in Oklahoma ruled last week that viatical investments are securities under state law, giving the state’s Department of Securities – and, potentially, similar agencies elsewhere – the oversight needed to prevent fraud in the viatical industry.

In a test case, the securities department argued that two viatical companies operating in Oklahoma were selling securities when they sold interests in the life insurance policies of terminally ill patients.

In selling securities, the viatical companies failed to get a license, register their product and make proper disclosures to investors, says Melanie Hall, the department’s deputy administrator.

Oklahoma County District Judge Daniel L. Owens rejected the claims of Accelerated Benefits Corp. of Orlando, Fla., and American Financial Associates LLC of Oklahoma City that they were shielded by a 1996 federal district court case, Life Partners Inc. v. SEC.

The company had contended that in that case, viatical settlements were found to not meet the test of what qualifies as a security under federal law.

Though an appeal is expected, the March 13 ruling gives Oklahoma greater legal authority to pursue viatical fraud and provides other states with a legal precedent, says Ms. Hall.

Bill to cut fees on securities due

* A bill to reduce fees on securities transactions is to be introduced March 19.

The bill, introduced by Rep. Vito Fossella, R-N.Y., and co-sponsored by Rep. Michael Oxley, the Ohio Republican who heads the House Financial Services Committee, and 25 other Republicans and Democrats, would eliminate all fees beyond what is needed to finance the Securities and Exchange Commission.

The reductions would amount to an estimated $14 billion over 10 years.

Transaction fees would be reduced by more than 60% under the bill, which is a greater reduction than is called for in a similar bill that was approved by the Senate Banking Committee. An estimated $2.5 billion will be collected in fees this year, while the SEC’s budget is only $422 million.

Wrap assets surged $50 billion in 2000

* Mutual fund wrap assets grew by $50 billion last year to more than $150 billion, according to the latest research by Strategic Insight, a New York consulting firm. American Express Financial Advisors set the pace with nearly $10 billion of the inflows.

SEI Investments Co. in Wayne, Pa., was second behind AmEx, with nearly $8 billion in new wrap assets last year.

Avi Nachmany, director of research at Strategic Insight in New York, says the steady inflows in wrap assets over a period of general market decline is evidence that investors are shifting out of the do-it-yourself mode.

“Now that the era of legalized gambling is over, the environment has shifted to the realization of the cost of being on your own,” he says. “The value of having a financial adviser becomes clearer in a down market.”

New privacy bill presented to Senate

* Sen. Richard Shelby, R-Ala., introduced legislation last week that would prohibit financial institutions from sharing and selling their customers’ personal spending information or behavioral profiles without their consent.

The bill would require financial companies to get customers’ approval before sharing personally identifiable behavioral profiling information.