Entities Exempt from Government Securities Act Requirements

B

The Government Securities Act (GSA) regulates the underwriting, distribution, and trading of government securities by entities in the United States. The Act applies to both primary dealers and other firms that trade government securities. However, certain entities are exempt from the requirements of the Act.

To answer this question, we need to determine which of the four entities is exempt from the requirements of the Government Securities Act. Let's examine each option in turn:

A. A bank that operates a securities underwriting department to provide underwriting services to issuers of government securities: This bank is not exempt from the requirements of the Government Securities Act because it operates a securities underwriting department that provides underwriting services for government securities. Therefore, option A is incorrect.

B. A national bank that purchases and sells government securities only in its fiduciary capacity on behalf of clients in its trust department: This bank may be exempt from the requirements of the Government Securities Act. Under Section 3(a)(2) of the Act, banks that purchase and sell government securities "in a fiduciary capacity" are exempt from the Act's registration and reporting requirements. Therefore, option B is potentially correct.

C. A bank that operates a financial advisory service that provides advice to clients on the purchase and sale of government securities: This bank is not exempt from the requirements of the Government Securities Act because it provides financial advisory services for government securities. Therefore, option C is incorrect.

D. A bank that operates an investment department to provide investment advice and purchase and sell all types of securities (including government securities) for clients: This bank is not exempt from the requirements of the Government Securities Act because it operates an investment department that purchases and sells government securities for clients. Therefore, option D is incorrect.

In summary, the only option that is potentially correct is B. A national bank that purchases and sells government securities only in its fiduciary capacity on behalf of clients in its trust department may be exempt from the requirements of the Government Securities Act.