It only took eight years, but the SEC and the Board of Governors of the Federal Reserve System passed final rules this week defining how banks can act as securities brokers.

The new rules will implement the bank broker provisions of the Gramm-Leach-Bliley Act of 1999. The Act amended the definition of "broker" in the Securities Exchange Act of 1934 so banks would no longer be completely excluded from the broker/dealer registration requirements. Essentially, the rules would allow clients to buy financial products or services, including securities, insurance, banking or trust services, from a bank.

“In plain English, this is allowing banks to be more closely affiliated with broker/dealers,” says William Jacobson, a Providence, R.I.-based securities attorney.

The SEC says the new rules (read the full SEC release here) are an attempt to spur increased competition in the financial services industry by allowing them to offer more services to investors at lower cost. "A customer should be able to walk into a financial institution and get any financial product he or she needs—securities, insurance, banking or trust services," said SEC Chairman Christopher Cox. "But Congress recognized those benefits couldn't be achieved without new ways to safeguard investors that would be consistent with continued innovation.” Cox called the action “long overdue” and “welcome news for investors.”

There are about nine exemptions within the rules including a networking exception that allows banks to receive compensation for referring bank customers to broker/dealers. The others deal with fiduciary status, sweep-accounts and restricted securities.

The Board of Governors will consider whether to adopt these rules at its Monday meeting.