What Is the Gramm-Leach-Bliley Act of 1999 (GLBA)?
The Gramm-Leach-Bliley Act of 1999 (GLBA) was once a bi-partisan regulation beneath President Bill Clinton, passed by way of Congress on November 12, 1999. The GLBA was once an attempt to change and modernize the financial industry. The GLBA is most widely known since the repeal of the Glass-Steagall Act of 1933, which discussed that industry banks were not allowed to supply financial services—like investments and insurance-related services—as part of same old operations.
Key Takeaways
- The act was once passed in late 1999 and we could in banks to supply financial services previously forbidden by way of the Glass-Steagall Act.
- Beneath the GLBA, each and every manager or service-person is best allowed to advertise or prepare one type of financial product/instrument.
- All banks will have to share their information-sharing practices with the patron.
Figuring out the Gramm-Leach-Bliley Act of 1999 (GLBA)
As a result of the phenomenal losses incurred because of 1929’s Black Tuesday and Thursday, the Glass-Steagall Act was once at first created to protect monetary establishment depositors from additional exposure to risk, associated with stock market volatility. As a result of this, for a couple of years, industry banks were not legally allowed to act as brokers. Since many regulations had been instituted given that Thirties to protect monetary establishment depositors, GLBA was once created to allow the ones financial industry participants to supply additional services.
GLBA was once passed on the heels of commercial monetary establishment Citicorp merger with the insurance policy corporate Travelers Staff. This ended within the formation of the conglomerate Citigroup, which presented not best industry banking and insurance policy services, however as well as lines of industrial related to securities. Its producers at this stage built-in Citibank, Smith Barney, Primerica, and Travelers. Citicorp merger was once a violation of the then-existing Glass–Steagall Act, along with the Monetary establishment Protecting Company Act of 1956.
The act is regularly known as the Gramm-Leach-Bliley Financial Services Modernization Act.
To allow the merger to occur, the U.S. Federal Reserve gave Citigroup a temporary waiver in September 1998—a precursor to Congress’s passage of GLBA. Shifting forward, other an an identical mergers may well be completely jail. Repealing Glass–Steagall moreover removed the ban of “simultaneous service by any officer, director, or employee of a securities firm as an officer, director, or employee of any member bank.”
The Gramm-Leach-Bliley Act and Shopper Privacy
The Gramm-Leach-Bliley Act moreover required financial institutions offering shoppers loan services, financial or investment advice, and/or insurance policy, to fully provide an explanation for their information-sharing practices to their consumers. Companies will have to allow their consumers the strategy to “opt-out” within the match that they do not want their refined information shared.
While many consider the most important information, corresponding to monetary establishment balances and account numbers, to be confidential, in fact, this data is constantly bought and acquired by way of banks, credit card firms, and others. Gramm-Leach-Bliley required limited privacy protections in opposition to such private news product sales, at the side of pretexting (obtaining private information by way of false pretenses).
