In this Article, Professor Malloy explores the effects of the federal
securities antifraud rule on the regulation of banks. In particular, h
e focuses on the changes in regulation of commercial bank trust depart
ment activities that followed the revelations in Texas Gulf Sulphur of
alleged tipping between the commercial and trust departments of a maj
or New York bank. He also argues that federal bank regulatory policy h
as now turned away from disclosure-oriented regulation in favor of cap
ital supervision, and that this may be a mistaken approach to the regu
lation of banking.