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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1062 Reported in House (RH)]

                                                  Union Calendar No. 74

104th CONGRESS

  1st Session

                               H. R. 1062

               [Report No. 104-127, Parts I, II, and III]

_______________________________________________________________________

                                 A BILL

To enhance competition in the financial services industry by providing 
a prudential framework for the affiliation of banks, securities firms, 
                 and other financial service providers.

_______________________________________________________________________

                             June 22, 1995

  Reported with an amendment without recommendation, committed to the 
Committee of the Whole House on the State of the Union, and ordered to 
                               be printed

                                                  Union Calendar No. 74
104th CONGRESS
  1st Session
                                H. R. 1062

               [Report No. 104-127, Parts I, II, and III]

To enhance competition in the financial services industry by providing 
a prudential framework for the affiliation of banks, securities firms, 
                 and other financial service providers.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           February 27, 1995

  Mr. Leach introduced the following bill; which was referred to the 
 Committee on Banking and Financial Services and, in addition, to the 
 Committee on Commerce, for a period to be subsequently determined by 
the Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

                              May 18, 1995

 Reported from the Committee on Banking and Financial Services with an 
                               amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

                              May 18, 1995

Referral to the Committee on Commerce extended for a period ending not 
                        later than June 16, 1995

                             June 16, 1995

Referral to the Committee on Commerce extended for a period ending not 
                        later than June 22, 1995

                             June 22, 1995

   Reported from the Committee on Commerce with an amendment without 
 recommendation, committed to the Committee of the Whole House on the 
             State of the Union, and ordered to be printed
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]
    [For text of introduced bill, see copy of bill as introduced on 
                           February 27, 1995]

_______________________________________________________________________

                                 A BILL

 
To enhance competition in the financial services industry by providing 
a prudential framework for the affiliation of banks, securities firms, 
                 and other financial service providers.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Financial Services 
Competitiveness Act of 1995''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.

 TITLE I--BANK SECURITIES ACTIVITIES AND AFFILIATIONS WITH SECURITIES 
                  FIRMS AND OTHER FINANCIAL COMPANIES

                   Subtitle A--Securities Activities

Sec. 101. Anti-affiliation provision of the Banking Act of 1933 
                            repealed.
Sec. 102. Financial services holding companies authorized to have 
                            securities affiliates.
Sec. 103. Establishment and operations of securities affiliates.
Sec. 104. Safeguards relating to securities affiliates.
Sec. 105. Ownership of shares of certain companies by financial 
                            services holding companies.
Sec. 106. Provisions applicable to limited purpose banks.
Sec. 107. Securities company affiliations of FDIC--insured banks.
Sec. 108. Authority to terminate grandfather rights under the 
                            International Banking Act of 1978.
Sec. 109. Effect on State laws prohibiting the affiliation of banks and 
                            securities companies.
Sec. 110. Municipal securities.
Sec. 111. Interagency agreement relating to retail sales of certain 
                            nondeposit investment products.
Sec. 112. Effective date.

             Subtitle B--Investment Bank Holding Companies

Sec. 116. Investment bank holding companies.
Sec. 117. Wholesale financial institutions.

                    Subtitle C--Financial Activities

Sec. 121. Financial activities.
Sec. 122. No prior approval required for well capitalized and well 
                            managed financial services holding 
                            companies.
Sec. 123. Streamlined examination and reporting requirements for all 
                            financial services holding companies.
Sec. 124. Holding company supervision for financial services holding 
                            companies engaged primarily in nonbanking 
                            activities.
Sec. 125. Conversion of unitary savings and loan holding companies to 
                            financial services holding companies.
Sec. 126. Financial services advisory committee.
Sec. 127. Coordination with State law.
Sec. 128. Conforming amendments to the Bank Holding Company Act of 
                            1956.
Sec. 129. Conforming amendments to the Bank Holding Company Act 
                            Amendments of 1970.
Sec. 130. Credit cards for business purposes.

    Subtitle D--Interagency Banking and Financial Services Advisory 
                               Committee

Sec. 141. Interagency banking and financial services advisory 
                            committee.

                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

Sec. 201. Definition of broker.
Sec. 202. Definition of dealer.
Sec. 203. Power to exempt from the definitions of broker and dealer.
Sec. 204. Margin requirements.
Sec. 205. Effective date.

             Subtitle B--Bank Investment Company Activities

Sec. 211. Custody of investment company assets by affiliated bank.
Sec. 212. Indebtedness to affiliated person.
Sec. 213. Lending to an affiliated investment company.
Sec. 214. Independent directors.
Sec. 215. Additional SEC disclosure authority.
Sec. 216. Definition of broker under the Investment Company Act of 
                            1940.
Sec. 217. Definition of dealer under the Investment Company Act of 
                            1940.
Sec. 218. Removal of the exclusion from the definition of investment 
                            adviser for banks that advise investment 
                            companies.
Sec. 219. Definition of broker under the Investment Advisers Act of 
                            1940.
Sec. 220. Definition of dealer under the Investment Advisers Act of 
                            1940.
Sec. 221. Interagency consultation.
Sec. 222. Treatment of bank common trust funds.
Sec. 223. Investment advisers prohibited from having controlling 
                            interest in registered investment company.
Sec. 224. Conforming change in definition.
Sec. 225. Effective date.
 TITLE I--BANK SECURITIES ACTIVITIES AND AFFILIATIONS WITH SECURITIES 
                  FIRMS AND OTHER FINANCIAL COMPANIES

                   Subtitle A--Securities Activities

SEC. 101. ANTI-AFFILIATION PROVISION OF THE BANKING ACT OF 1933 
              REPEALED.

    (a) Section 20 Repealed.--Section 20 (12 U.S.C. 377) of the Banking 
Act of 1933 (commonly referred to as the ``Glass-Steagall Act'') is 
repealed.
    (b) Conforming Amendment to Section 32.--Section 32 (12 U.S.C. 78) 
of the Banking Act of 1933 is amended by adding at the end the 
following sentence: ``This section shall not apply so as to prohibit an 
officer, director, or employee of a securities affiliate (as defined in 
section 2 of the Financial Services Company Act of 1995) from serving 
at the same time as an officer, director, or employee of a member bank 
affiliated with that securities affiliate pursuant to section 10 of 
such Act. This section shall not apply so as to prohibit an officer, 
director, or employee of an investment company registered under the 
Investment Company Act of 1940 or an investment adviser registered 
under the Investment Advisers Act of 1940 from serving at the same time 
as an officer, director, or employee of a member bank.''.

SEC. 102. FINANCIAL SERVICES HOLDING COMPANIES AUTHORIZED TO HAVE 
              SECURITIES AFFILIATES.

    Section 4(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(c)) is amended--
            (1) by striking ``or'' at the end of paragraph (13);
            (2) by striking the period at the end of paragraph (14) and 
        inserting ``; or''; and
            (3) by adding after paragraph (14) the following new 
        paragraph:
            ``(15) shares of a securities affiliate in accordance with 
        section 10.''.

SEC. 103. ESTABLISHMENT AND OPERATIONS OF SECURITIES AFFILIATES.

    (a) In General.--Section 10 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1841 et seq.) is amended to read as follows:

``SEC. 10. SECURITIES ACTIVITIES.

    ``(a) Activities Permissible for Securities Affiliates.--
            ``(1) In general.--A securities affiliate may engage in 1 
        or more of the following activities:
                    ``(A) Underwrite, deal in, broker, place, or 
                distribute securities of any type, provide investment 
                advice regarding securities of any type, and engage in 
                other securities activities as determined by the Board.
                    ``(B) Sponsor, organize, control, manage, and act 
                as investment adviser to an investment company.
                    ``(C) Engage in, or acquire the shares of a company 
                engaged in, any activity if--
                            ``(i) a provision of section 4(c) permits 
                        financial services holding companies generally 
                        to engage in that activity or acquire those 
                        shares; and
                            ``(ii) either--
                                    ``(I) the Board permits the 
                                financial services holding company to 
                                engage in that activity or acquire 
                                those shares through the securities 
                                affiliate; or
                                    ``(II) a provision of section 4(c) 
                                permits the financial services holding 
                                company to engage in such activity or 
                                acquire such shares without the Board's 
                                approval.
            ``(2) Factor to be considered.--In making determinations 
        pursuant to this section, the Board shall take into account the 
        need for securities firms affiliated with banks to be 
        innovative and competitive.
    ``(b) Acquiring Interest in Securities Affiliate.--
            ``(1) Notice required.--A financial services holding 
        company shall not, without complying with and receiving 
        approval pursuant to the notice procedure in section 4(j)(1), 
        directly or indirectly acquire or retain more than 5 percent of 
        the voting shares of, or all or substantially all of the assets 
        of, a securities affiliate (or a company that would be a 
        securities affiliate if the Board permitted the financial 
        services holding company to acquire that company).
            ``(2) Criteria for approval.--The Board shall disapprove a 
        notice required under paragraph (1) unless the Board determines 
        that the requirements of the following subparagraphs have been 
        met:
                    ``(A) Capital.--
                            ``(i) Depository institutions.--
                                    ``(I) The lead depository 
                                institution of the financial services 
                                holding company is well capitalized.
                                    ``(II) Well capitalized depository 
                                institutions control at least 80 
                                percent of the aggregate total risk-
                                weighted assets of depository 
                                institutions controlled by the 
                                financial services holding company.
                                    ``(III) All depository institutions 
                                controlled by the financial services 
                                holding company are well capitalized or 
                                adequately capitalized.
                            ``(ii) Recently acquired depository 
                        institutions.--Depository institutions acquired 
                        by a financial services holding company during 
                        the 12-month period preceding the submission of 
                        a notice under paragraph (1) may be excluded 
                        for purposes of clause (i)(II) if--
                                    ``(I) the financial services 
                                holding company has submitted a plan to 
                                the appropriate Federal banking agency 
                                to restore the capital of the 
                                institution and the plan has been 
                                accepted by such agency; and
                                    ``(II) all such institutions that 
                                are excluded for the purposes of clause 
                                (i)(II) represent, in the aggregate, 
                                less than 25 percent of the aggregate 
                                total risk-weighted assets of all 
                                depository institutions controlled by 
                                the financial services holding company.
                            ``(iii) Financial services holding 
                        company.--The financial services holding 
                        company is (and immediately after the 
                        acquisition of a securities affiliate would 
                        continue to be) adequately capitalized under 
                        the capital standards applicable, if any, to 
                        such financial services holding company.
                            ``(iv) Foreign banks and companies.--For 
                        purposes of applying this subsection and other 
                        provisions of this section, the Board shall 
                        establish and apply comparable capital 
                        standards for the acquisition, retention, and 
                        operation of a securities affiliate in the 
                        United States by a foreign bank that operates a 
                        branch or agency or owns or controls a bank or 
                        commercial lending company in the United 
                        States, and any company that owns or controls 
                        such a foreign bank, giving due regard to the 
                        principle of national treatment and equality of 
                        competitive opportunity.
                    ``(B) Alternative capital treatment for well 
                capitalized financial services holding companies.--
                            ``(i) In general.--A financial services 
                        holding company and the depository institution 
                        subsidiaries of such company shall be deemed to 
                        have met the capital requirements set forth in 
                        subparagraph (A) if--
                                    ``(I) the holding company files a 
                                written notice with the Board of such 
                                company's election to meet such capital 
                                requirements in the manner provided in 
                                this subparagraph;
                                    ``(II) all depository institutions 
                                controlled by the financial services 
                                holding company are at least adequately 
                                capitalized; and
                                    ``(III) the financial services 
                                holding company is (and immediately 
                                after the acquisition of a securities 
                                affiliate would continue to be) well 
                                capitalized.
                            ``(ii) Losses incurred by fdic.--A 
                        financial services holding company which makes 
                        an election under clause (i) in connection with 
                        the acquisition of control of any securities 
                        affiliate shall be liable for any loss incurred 
                        by the Federal Deposit Insurance Corporation, 
                        or any loss which the Federal Deposit Insurance 
                        Corporation reasonably anticipates incurring in 
                        connection with--
                                    ``(I) the default of any insured 
                                depository institution controlled by 
                                the financial services holding company; 
                                or
                                    ``(II) any assistance provided by 
                                the Corporation to any insured 
                                depository institution in danger of 
                                default that is controlled by the 
                                financial services holding company.
                    ``(C) Managerial resources.--
                            ``(i) In general.--The financial services 
                        holding company and each depository institution 
                        subsidiary of such company--
                                    ``(I) are well managed; and
                                    ``(II) were well managed during the 
                                12-month period preceding the 
                                acquisition of a securities affiliate 
                                (but for purposes of this subparagraph 
                                the Board may disregard any depository 
                                institution acquired by the financial 
                                services holding company during that 
                                period).
                            ``(ii) Securities activities.--The 
                        financial services holding company has the 
                        managerial resources to conduct the proposed 
                        securities activities safely and soundly.
                    ``(D) Internal controls.--The financial services 
                holding company has established adequate policies and 
                procedures to manage financial and operational risks, 
                to provide reasonable assurance of compliance with this 
                section and other applicable laws, and to provide 
                reasonable assurance of maintenance of corporate 
                separateness within the financial services holding 
                company.
                    ``(E) No detrimental effect on financial services 
                holding company or its subsidiary depository 
                institutions.--The acquisition of a securities 
                affiliate would not adversely affect the safety and 
                soundness of--
                            ``(i) the financial services holding 
                        company; or
                            ``(ii) any depository institution 
                        subsidiary of the financial services holding 
                        company.
                    ``(F) Concentration of resources.--The acquisition 
                of a securities affiliate would not result in an undue 
                concentration of resources in the financial services 
                business.
                    ``(G) Responsiveness to community needs.--The lead 
                insured depository institution subsidiary of the 
                financial services holding company and insured 
                depository institutions controlling at least 80 percent 
                of the aggregate total risk-weighted assets of insured 
                depository institutions controlled by the financial 
                services holding company have achieved a `satisfactory 
                record of meeting community credit needs', or better, 
                during the most recent examination of such insured 
                depository institutions.
            ``(3) Limited notice procedures for proposals by well 
        capitalized and well managed companies to acquire additional 
        securities affiliates.--A financial services holding company 
        may, without providing the notice required under paragraph (1), 
        directly or indirectly acquire the shares or substantially all 
        of the assets of any company that is engaged in activities 
        described in subparagraph (A) or (B) of subsection (a)(1), if--
                    ``(A) the financial services holding company 
                previously received the Board's approval under 
                paragraph (1) to control a securities affiliate and 
                continues to control the securities affiliate pursuant 
                to that approval;
                    ``(B) the acquisition proposal qualifies under 
                section 4(j)(4);
                    ``(C) the financial services holding company 
                provides the written notification required in section 
                4(j)(5); and
                    ``(D) the acquisition would not result in an undue 
                concentration of resources in the financial services 
                business.
    ``(c) Additional Investment in Securities Affiliate.--
            ``(1) Prior notice required.--A financial services holding 
        company that has acquired control of a securities affiliate 
        under this section shall not, directly or indirectly, make any 
        additional investment in the securities affiliate that is 
        considered capital for purposes of any capital requirement 
        imposed on the securities affiliate under the Securities 
        Exchange Act of 1934 (other than an extension of credit under a 
        revolving credit agreement approved by the Board), unless the 
        financial services holding company gives the Board prior 
        written notice of the proposed investment and the Board--
                    ``(A) issues a written statement of the Board's 
                intent not to disapprove the notice; or
                    ``(B) does not disapprove the notice within 30 days 
                after the notice is filed.
            ``(2) No prior notice required for certain financial 
        services holding companies.--
                    ``(A) In general.--A financial services holding 
                company shall not be required to provide prior notice 
                under paragraph (1) if after making any investment 
                described in paragraph (1)--
                            ``(i) the financial services holding 
                        company would be adequately capitalized under 
                        the capital standards applicable, if any, to 
                        such financial services holding company and 
                        each of the financial services holding 
                        company's subsidiary depository institutions 
                        would be well capitalized; and
                            ``(ii) the financial services holding 
                        company and each of its subsidiary depository 
                        institutions are well managed (but for purposes 
                        of this clause the Board may disregard any 
                        depository institution acquired by the 
                        financial services holding company during the 
                        previous 12-month period).
                    ``(B) Subsequent notice.--A financial services 
                holding company that makes an investment pursuant to 
                subparagraph (A) shall provide written notice to the 
                Board of the additional investment within 10 days after 
                making the investment.
            ``(3) Criteria for disapproving notice.--The Board may 
        disapprove a notice filed under paragraph (1) if--
                    ``(A) any depository institution affiliate of the 
                securities affiliate is undercapitalized; or
                    ``(B) the Board determines that the financial 
                services holding company would be undercapitalized 
                under the capital standards applicable, if any, to such 
                financial services holding company after making the 
                investment or that the investment would otherwise be 
                unsafe or unsound.
            ``(4) Emergency approval.--Notwithstanding any provision of 
        this subsection, in the event of adverse market conditions, or 
        concerns regarding the financial or operational condition of 
        the securities affiliate, the Board may approve any additional 
        investment in the securities affiliate on an emergency basis if 
        such additional investment does not adversely affect the safety 
        and soundness of all insured depository institution affiliates 
        of such securities affiliate and does not diminish the ability 
        of the financial services holding company to maintain an 
        appropriate amount of capital in all such insured depository 
        institutions.
    ``(d) Provisions Applicable if Affiliated Depository Institution 
Ceases To Be Well Capitalized.--
            ``(1) Holding company action required if affiliated 
        institutions are not well capitalized.--
                    ``(A) Applicability.--This paragraph shall apply 
                if--
                            ``(i) the lead depository institution of 
                        the financial services holding company is not 
                        well capitalized, or
                            ``(ii) well capitalized depository 
                        institutions do not control at least 80 percent 
                        of the aggregate total risk-weighted assets of 
                        depository institutions affiliated with the 
                        securities affiliate.
                    ``(B) Capital maintenance agreement.--Within 30 
                days after subparagraph (A)
                 becomes applicable with respect to any financial 
services holding company, such company shall execute an agreement with 
the Board--
                            ``(i) to meet the capital requirements of 
                        subparagraph (A) within a reasonable period of 
                        time; or
                            ``(ii) to divest control of the depository 
                        institution in an orderly manner within 180 
                        days, or within such additional period of time 
                        as the Board may determine is reasonably 
                        required in order to effect such divestiture.
                    ``(C) Restrictions on certain securities 
                activities.--If a financial services holding company 
                fails to meet the requirements of, or comply with the 
                agreement executed pursuant to, subparagraph (B), a 
                securities affiliate of such financial services holding 
                company shall not, beginning 180 days after 
                subparagraph (A) becomes applicable with respect to 
                such company, agree to underwrite or deal in, any 
                securities other than--
                            ``(i) securities expressly authorized by 
                        section 5136 of the Revised Statutes of the 
                        United States as permissible for a national 
                        bank to underwrite or deal in;
                            ``(ii) securities backed by or representing 
                        interests in notes, drafts, acceptances, loans, 
                        leases, receivables, other obligations, or 
                        pools of any such obligations; or
                            ``(iii) securities issued by an open-end 
                        investment company registered under the 
                        Investment Company Act of 1940.
                    ``(D) Exception.--The Board may permit the 
                securities affiliate of a financial services holding 
                company described in subparagraph (C) to underwrite or 
                deal in securities not described in clauses (i) through 
                (iii) of such subparagraph for a period of 1 year from 
                the date on which subparagraph (A) first becomes 
                applicable with respect to such company, if--
                            ``(i) the financial services holding 
                        company submits a capital restoration plan to 
                        the Board specifying the steps the financial 
                        services holding company will take to meet the 
                        requirements of subsection (b)(2)(A), and 
                        containing such other information as the Board 
                        may require; and
                            ``(ii) the Board approves the plan.
                    ``(E) Extension of period.--
                            ``(i) In general.--Upon application by a 
                        financial services holding company, the Board 
                        may extend, for not more than 1 year at a time, 
                        the period provided in subparagraph (C).
                            ``(ii) Maximum extension.--No extension 
                        under clause (i) of the period provided in 
                        subparagraph (C) shall, in the aggregate, 
                        exceed 2 years.
            ``(2) Divestiture of securities affiliate.--
                    ``(A) In general.--A financial services holding 
                company shall divest itself of the securities affiliate 
                if any of the financial services holding company's 
                subsidiary depository institutions has been 
                undercapitalized for more than 6 months.
                    ``(B) Extending time.--The Board may provide 
                additional time, not exceeding 18 months, for a 
                divestiture under subparagraph (A) if--
                            ``(i) the appropriate Federal banking 
                        agency or, in the case of a foreign bank or 
                        company that owns or controls a foreign bank, 
                        the Board, has approved the undercapitalized 
                        institution's capital restoration plan; and
                            ``(ii) the Board determines that the 
                        securities affiliate poses no significant risk 
                        to any affiliated depository institution.
    ``(e) Securities Affiliate Excluded in Determining Whether 
Financial Services Holding Company Is Adequately Capitalized.--
            ``(1) In general.--In determining whether a financial 
        services holding company is adequately capitalized--
                    ``(A) the financial services holding company's 
                capital and total assets shall each be reduced by--
                            ``(i) an amount equal to the amount of the 
                        financial services holding company's equity 
                        investment in any securities affiliate; and
                            ``(ii) an amount equal to the amount of any 
                        extensions of credit by the financial services 
                        holding company to any securities affiliate 
                        that are considered capital for purposes of any 
                        capital requirement imposed on the securities 
                        affiliate under section 15(c)(3) of the 
                        Securities Exchange Act of 1934; and
                    ``(B) the securities affiliate's assets and 
                liabilities shall not be consolidated with those of the 
                financial services holding company.
            ``(2) Exception for nonsecurities activities.--Paragraph 
        (1) shall not apply to the extent that the Board determines by 
        regulation or order that--
                    ``(A) an item described in such paragraph relates 
                to activities which are not described in subparagraph 
                (A) or (B) of subsection (a)(1); or
                    ``(B) another method of adjusting capital is more 
                appropriate to ensure the safety and soundness of 
                depository institutions.
    ``(f) Safeguards.--Each financial services holding company and each 
subsidiary of any such company shall comply with all applicable 
safeguard requirements of section 11.
    ``(g) Activities Not Permissible for Depository Institutions.--
            ``(1) In general.--A financial services holding company 
        that acquires control of a securities affiliate shall not, 
        after the end of the 1-year period beginning on the date of 
        such acquisition, permit any depository
         institution, or any subsidiary of any depository institution, 
which is controlled by such holding company--
                    ``(A) to engage, directly or indirectly, in the 
                United States--
                            ``(i) in underwriting securities backed by 
                        or representing interests in notes, drafts, 
                        acceptances, loans, leases, receivables, other 
                        obligations, or pools of any such obligations 
                        originated or purchased by the institution or 
                        its affiliates, other than--
                                    ``(I) securities backed by or 
                                representing an interest in 1--4 family 
                                residential mortgages originated or 
                                purchased by the depository institution 
                                or any affiliate or subsidiary of the 
                                institution; or
                                    ``(II) securities backed by or 
                                representing an interest in consumer 
                                receivables or consumer leases 
                                originated or purchased by the 
                                depository institution or any affiliate 
                                or subsidiary of the institution; or
                            ``(ii) in underwriting or dealing in any 
                        other securities, except securities expressly 
                        authorized by section 5136 of the Revised 
                        Statutes of the United States as permissible 
                        for a national bank to underwrite or deal in; 
                        or
                    ``(B) to make an equity investment in any 
                securities affiliate.
            ``(2) Exception for certain edge act and agreement 
        corporations.--The limitations in paragraph (1)(A) shall not 
        apply with respect to activities conducted by a subsidiary of a 
        financial services holding company which is held pursuant to 
        section 25 or 25A of the Federal Reserve Act or section 
        4(c)(13) of this Act.
            ``(3) Rule of construction.--No provision of this 
        subsection shall be construed as permitting a securities 
        affiliate to accept deposits in contravention of section 21 of 
        the Banking Act of 1933.
    ``(h) Approval of Securities Activities Under Section 4(c)(8) 
Restricted.--The Board shall deny any notice or application by a 
financial services holding company under authority of section 4(c)(8) 
to engage in, or acquire the shares of a company engaged in, 
underwriting or dealing in securities in the United States, other than 
securities expressly authorized by section 5136 of the Revised Statutes 
of the United States as permissible for a national bank to underwrite 
or deal in.
    ``(i) Bankers' Banks.--
            ``(1) In general.--For purposes of this section, each 
        shareholder of or participant in a company that controls a 
        depository institution described in section 5169(b)(1) of the 
        Revised Statutes of the United States or in a similar statute 
        of any State, and each subsidiary of such a shareholder or 
        participant, shall be treated as if such shareholder, 
        participant, or subsidiary were a subsidiary of that company.
            ``(2) Exception.--This subsection shall not apply with 
        respect to a shareholder or participant in a company described 
        in subparagraph (A) (or any subsidiary of such shareholder or 
        participant) if the shareholder or participant, and the 
        affiliates of any such shareholder or participant, do not, in 
        the aggregate, control more than 5 percent of any class of 
        voting shares of such company.
    ``(j) Shares Acquired in Connection With Underwriting and 
Investment Banking Activities.--
            ``(1) In general.--Notwithstanding section 4(a), a 
        financial services holding company may directly or indirectly 
        acquire or control, whether as principal, on behalf of 1 or 
        more entities (including entities, other than a depository 
        institution or subsidiary of a depository institution, that the 
        financial services holding company controls), or otherwise, 
        shares, assets, or ownership interests (including without 
        limitation debt or equity securities, partnership interests, 
        trust certificates, or other instruments representing 
        ownership) of a company or other entity, whether or not 
        constituting control of such company or entity, engaged in 
        activities not authorized pursuant to section 4 if--
                    ``(A) the shares, assets, or ownership interests 
                are not acquired or held by a depository institution or 
                a subsidiary of a depository institution;
                    ``(B) such shares, assets, or ownership interests 
                are acquired and held by a securities affiliate or an 
                affiliate of a securities affiliate as part of a bona 
                fide underwriting or investment banking activity, which 
                includes investment activities engaged in for the 
                purpose of appreciation and ultimate resale or other 
                disposition of the investment, and such shares, assets, 
                or ownership interests are held for such a period of 
                time as will permit the sale or disposition thereof on 
                a reasonable basis consistent with the nature of such 
                activities; and
                    ``(C) during the period such shares, assets, or 
                ownership interests are held, the financial services 
                holding company does not actively manage or operate the 
                company or entity except insofar as necessary to 
                achieve the objectives of subparagraph (B).
            ``(2) No expansion of underwriting activities.--No 
        provision of this subsection shall be construed as authorizing 
        any financial services holding company, or any subsidiary of 
        any such company, to underwrite or deal in any security.
    ``(k) Definitions.--For purposes of this section and sections 11 
and 12, the following definitions shall apply:
            ``(1) Capital stock and surplus.--The term `capital stock 
        and surplus' has the same meaning as in section 23A of the 
        Federal Reserve Act.
            ``(2) Covered transaction.--The term `covered transaction' 
        has the same meaning as in section 23A of the Federal Reserve 
        Act.
            ``(3) Security.--
                    ``(A) In general.--The term `security' has the 
                meaning given to such term in section 3(a)(10) of the 
                Securities Exchange Act of 1934.
                    ``(B) Exceptions.--For purposes of this section, 
                other than subsection (a), the term `security' does not 
                include any of the following:
                            ``(i) A contract of insurance.
                            ``(ii) A deposit account, savings account, 
                        certificate of deposit, or other deposit 
                        instrument issued by a depository institution.
                            ``(iii) A share account issued by a savings 
                        association if the account is insured by the 
                        Federal Deposit Insurance Corporation.
                            ``(iv) A banker's acceptance.
                            ``(v) A letter of credit issued by a 
                        depository institution.
                            ``(vi) A debit account at a depository 
                        institution arising from a credit card or 
                        similar arrangement.
                            ``(vii) A loan or loan participation (as 
                        determined by the Board).
                    ``(C) Board's authority to exempt traditional 
                banking products.--The Board may, by regulation or 
                order and after consultation with and consideration of 
                the views of the Securities and Exchange Commission, 
                exempt a banking product from the definition of 
                security if the Board determines that--
                            ``(i) the product is more appropriately 
                        regulated as a banking product; and
                            ``(ii) the exemption is otherwise 
                        consistent with the purposes of this section.
                    ``(D) Definition for limited purpose.--The fact 
                that a particular instrument is excluded pursuant to 
                subparagraph (B) or (C) from the definition of security 
                for purposes of this section shall not be construed as 
                finding or implying that such instrument is or is not a 
                security for purposes of Federal securities laws.''.
    (b) Transition Rule for Securities Affiliates Approved Under 
Section 4(c)(8).--
            (1) Conversion to (4)(c)(15) subsidiary.--
                    (A) In general.--Except as provided in subparagraph 
                (B) and paragraphs (3) and (4), effective 18 months 
                after the date of enactment of this Act, no financial 
                services holding company may engage in, or retain the 
                shares of any company engaged in, underwriting or 
                dealing in securities based on the approval of an 
                application under section 4(c)(8) of the Bank Holding 
                Company Act of 1956 (as in effect before the date of 
                the enactment of the Financial Services Competitiveness 
                Act of 1995) unless the financial services holding 
                company has obtained the Board's approval to retain the 
                shares of that company under section 10.
                    (B) Exception for bank eligible securities.--
                Subparagraph (A) shall not apply with respect to 
                underwriting or dealing in securities expressly 
                authorized by section 5136 of the Revised Statutes of 
                the United States as permissible for a national bank to 
                underwrite or deal in.
            (2) Extending time.--
                    (A) In general.--The Board may, for good cause 
                shown, extend the time provided under paragraph (1) for 
                not more than 18 months.
                    (B) Pending notices.--If a financial services 
                holding company has filed a notice under section 10(b) 
                of the Bank Holding Company Act of 1956 not later than 
                180 days after the date of enactment of this Act, 
                paragraph (1) shall not apply with respect to the 
                company engaged in such underwriting or dealing until 
                180 days after the Board has acted on the notice.
            (3) Conversion procedures for companies previously 
        authorized to conduct securities activities.--Any financial 
        services holding company that controls a company engaged in 
        underwriting and dealing in corporate debt and equity 
        securities pursuant to an order issued by the Board under 
        section 4(c)(8) of the Bank Holding Company Act of 1956 before 
        the date of enactment of the Financial Services Competitiveness 
        Act of 1995 shall be treated as follows:
                    (A) Revenue test and certain other restrictions.--
                Upon filing the notice required under section 10(b) of 
                the Financial Services Holding Company Act of 1995, the 
                financial services holding company shall be relieved 
                from--
                            (i) the limitation contained in such order 
                        on the amount of revenue that may be derived 
                        from securities underwriting and dealing 
                        activities; and
                            (ii) any other restriction contained in 
                        such order that would not be required under 
                        section 11 of such Act, as permitted by the 
                        Board.
                    (B) Examination of internal controls.--The 
                financial services holding company shall not, in 
                connection with action on the notice submitted under 
                section 10(b)(1) of the Financial Services Holding 
                Company Act of 1995, be subject to an examination of 
                internal controls under section 10(b)(2)(D) of such 
                Act.
            (4) Retention of companies conducting limited securities 
        activities.--Notwithstanding paragraph (1), any financial 
        services holding company that controls a company engaged in 
        underwriting and dealing in securities (other than corporate 
        debt or equity securities) pursuant to an order issued by the 
        Board under section 4(c)(8) of the Bank Holding Company Act of 
        1956 before the date of enactment of the Financial Services 
        Competitiveness Act of 1995 may retain control of such company, 
        so long as such company complies with all of the limitations, 
        restrictions and conditions, including the limitation on the 
        revenue that may be derived from such underwriting or dealing 
        activities, contained in such order.
SEC. 104. SAFEGUARDS RELATING TO SECURITIES AFFILIATES.
    (a) In General.--The Bank Holding Company Act of 1956 (12 U.S.C. 
1841 et seq.) is amended--
            (1) by redesignating sections 11 and 12 as sections 13 and 
        14, respectively; and
            (2) by inserting after section 10 (as added by section 103 
        of this Act) the following new section:
``SEC. 11. SAFEGUARDS RELATING TO SECURITIES AFFILIATES.

    ``(a) Extensions of Credit and Asset Purchases Restricted.--
            ``(1) In general.--No depository institution affiliated 
        with a securities affiliate shall, directly or indirectly, do 
        any of the following:
                    ``(A) Extend credit in any manner to the securities 
                affiliate.
                    ``(B) Issue a guarantee, acceptance, or letter of 
                credit, including an endorsement or a standby letter of 
                credit, for the benefit of the securities affiliate.
                    ``(C) Except as provided in paragraph (3), purchase 
                for its own account, or for the account of any 
                subsidiary of such institution, financial assets of the 
                securities affiliate.
            ``(2) Exception for clearing securities.--Paragraph (1)(A) 
        shall not apply with respect to an extension of credit by a 
        well capitalized depository institution to acquire or sell 
        securities if the following conditions are met:
                    ``(A) The extension of credit is incidental to 
                clearing transactions in those securities through that 
                depository institution.
                    ``(B) Both the principal of and the interest on the 
                extension of credit are fully secured by those 
                securities.
                    ``(C) Either--
                            ``(i) the extension of credit is to be 
                        repaid before the close of business on the same 
                        business day; or
                            ``(ii) all of the following conditions are 
                        satisfied:
                                    ``(I) The securities cannot, in the 
                                ordinary course of business, be cleared 
                                on that business day.
                                    ``(II) The extension of credit is 
                                to be repaid before the close of 
                                business on the next business day.
                                    ``(III) Extensions of credit 
                                subject to this clause, when aggregated 
                                with all other covered transactions 
                                between the institution and all 
                                affiliated securities affiliates do not 
                                exceed 10 percent of the institution's 
                                capital stock and surplus.
                    ``(D) Either--
                            ``(i) the securities are securities 
                        expressly authorized by section 5136 of the 
                        Revised Statutes of the United States as 
                        permissible for a national bank to underwrite 
                        or deal in; or
                            ``(ii) the Board permits transactions under 
                        this paragraph in securities not described in 
                        clause (i) and the securities affiliate 
                        provides the depository institution with such 
                        additional security or other assurance of 
                        performance, if any, as the Board shall require 
                        to prevent such transactions from posing any 
                        appreciable risk to the institution.
            ``(3) Exceptions for certain securities purchased for a 
        depository institution's own account.--Paragraph (1)(C) shall 
        not apply with respect to purchases at the current market value 
        (based on reliable and regularly available price quotations) 
        of--
                    ``(A) securities expressly authorized by section 
                5136 of the Revised Statutes of the United States as 
                permissible for a national bank to underwrite or deal 
                in; or
                    ``(B) securities that--
                            ``(i) the securities affiliate has been 
                        marking to market daily; and
                            ``(ii) are rated investment grade by at 
                        least 1 nationally recognized statistical 
                        rating organization.
            ``(4) Other exceptions.--The Board may make exceptions to 
        paragraph (1) for well capitalized depository institutions if--
                    ``(A) the transaction is fully secured in 
                accordance with section 23A(c) of the Federal Reserve 
                Act; and
                    ``(B) the aggregate amount of covered transactions 
                between the institution and all securities affiliates 
                of the financial services holding company, excluding 
                transactions permitted under paragraph (2)(C)(i) or 
                (3)(A), does not exceed 10 percent of the institution's 
                capital stock and surplus.
    ``(b) Credit Enhancement Restricted.--
            ``(1) In general.--No depository institution affiliated 
        with a securities affiliate shall, directly or indirectly, 
        extend credit, or issue or enter into a standby letter of 
        credit, asset purchase agreement, indemnity, guarantee, 
        insurance, or other facility, for the purpose of enhancing the 
        marketability of a securities issue underwritten by the 
        securities affiliate.
            ``(2) Definition of term by board.--The Board shall 
        prescribe a definition for the term `for the purpose of 
        enhancing the marketability of a securities issue' for purposes 
        of paragraph (1).
            ``(3) Exception for bank eligible securities.--Paragraph 
        (1) shall not apply with regard to securities expressly 
        authorized by section 5136 of the Revised Statutes of the 
        United States as permissible for a national bank to underwrite 
        or deal in.
            ``(4) Application to well capitalized depository 
        institutions.--
                    ``(A) In general.--A well capitalized depository 
                institution may engage in a transaction described in 
                paragraph (1) if--
                            ``(i) the depository institution has 
                        adopted appropriate limits on exposure on a 
                        consolidated basis to any single customer
                         whose securities are underwritten by the 
securities affiliate; and
                            ``(ii) the institution and its securities 
                        affiliate have adopted appropriate procedures, 
                        including maintenance of necessary documentary 
                        records, to assure that any such extension of 
                        credit, standby letter of credit, asset 
                        purchase agreement, indemnity, guarantee, 
                        insurance or other facility, is on an arm's 
                        length basis.
                    ``(B) Arm's length transaction described.--An 
                extension of credit may be considered to be on an arm's 
                length basis if the terms and conditions are 
                substantially the same as those prevailing at the time 
                for comparable transactions involving securities that 
                are not underwritten by the securities affiliate.
                    ``(C) Compliance with paragraph (1).--The Board may 
                require, by regulation or order, compliance with 
                paragraph (1) by well capitalized depository 
                institutions exempt under this paragraph in order to 
                achieve any purpose specified in subsection (l).
    ``(c) Prohibition on Financing Purchase of Security Being 
Underwritten.--
            ``(1) In general.--No financial services holding company or 
        subsidiary of a financial services holding company (other than 
        a securities affiliate) shall knowingly extend or arrange for 
        the extension of credit, directly or indirectly, secured by or 
        for the purpose of purchasing any security while, or for 30 
        days after, that security is the subject of a distribution in 
        which a securities affiliate of that financial services holding 
        company participates as an underwriter or a member of a selling 
        group.
            ``(2) Reliance on acknowledgement.--For purposes of 
        paragraph (1), a financial services holding company or 
        subsidiary may rely on an express written acknowledgement 
        signed by the borrower that the credit is not secured by or for 
        the purpose of purchasing a security described in this 
        subparagraph.
            ``(3) Application to bank eligible securities.--Paragraph 
        (1) shall not apply with regard to extensions of credit if the 
        securities are securities expressly authorized by section 5136 
        of the Revised Statutes of the United States as permissible for 
        a national bank to underwrite or deal in.
            ``(4) Application to well capitalized depository 
        institutions.--The Board may make exceptions, by regulation or 
        order, to paragraph (1) for an extension of credit, after 
        consultation with and considering the views of the Securities 
        and Exchange Commission, if--
                    ``(A) the financial services holding company is 
                adequately capitalized;
                    ``(B) the financial services holding company's lead 
                depository institution is well capitalized;
                    ``(C) well capitalized depository institutions 
                control at least 80 percent of the assets of depository 
                institutions controlled by the financial services 
                holding company; and
                    ``(D) all depository institutions controlled by the 
                financial services holding company are well capitalized 
                or adequately capitalized.
            ``(5) Consistency with the federal securities laws.--No 
        provision of this subsection shall be construed as permitting a 
        securities affiliate to extend or maintain credit, or arrange 
        for an extension of credit, except in compliance with 
        applicable provisions of the Securities Exchange Act of 1934 
        and the regulations prescribed and interpretations issued under 
        such Act.
    ``(d) Restriction on Extending Credit to Make Payments on 
Securities.--
            ``(1) In general.--No depository institution affiliated 
        with a securities affiliate shall, directly or indirectly, 
        extend credit to an issuer of securities underwritten by the 
        securities affiliate for the purpose of paying the principal of 
        those securities or interest or dividends on those securities.
            ``(2) Exceptions for certain extensions of credit.--
        Paragraph (1) shall not apply to an extension of credit for a 
        documented purpose (other than paying principal, interest, or 
        dividends) if the timing, maturity, and other terms of the 
        credit, taken as a whole, are substantially different from 
        those of the underwritten securities.
            ``(3) Exceptions for bank eligible securities.--Paragraph 
        (1) shall not apply with respect to any security expressly 
        authorized by section 5136 of the Revised Statutes of the 
        United States as permissible for a national bank to underwrite 
        or deal in.
            ``(4) Application to well capitalized depository 
        institutions.--
                    ``(A) In general.--Paragraph (1) shall not apply 
                with respect to well capitalized depository 
                institutions if--
                            ``(i) the depository institution has 
                        adopted appropriate limits on exposure on a 
                        consolidated basis to any single customer whose 
                        securities are underwritten by the securities 
                        affiliate; and
                            ``(ii) the depository institution has 
                        adopted appropriate procedures, including 
                        maintenance of necessary documentary records, 
                        to assure that any extension of credit by the 
                        depository institution to an issuer for the 
                        purpose of paying the principal, interest or 
                        dividends on securities underwritten by the 
                        securities affiliate is on an arm's length 
                        basis.
                    ``(B) Arm's length transaction described.--An 
                extension of credit may be considered to have been made 
                on an arm's length basis if the terms and conditions 
                are substantially the same as those prevailing at the 
                time for comparable transactions with issuers whose 
                securities are not underwritten by the securities 
                affiliate.
                    ``(C) Compliance with subparagraph (a).--The Board 
                may require, by regulation or order, compliance with 
                paragraph (1) by well capitalized depository 
                institutions exempt under
                 this paragraph in order to achieve any purpose 
specified in subsection (l).
    ``(e) Common Directors and Senior Executive Officers.--
            ``(1) In general.--The Board shall, by regulation or order, 
        prescribe the circumstances under which directors and senior 
        executive officers of a securities affiliate may serve at the 
        same time as directors or senior executive officers of any 
        affiliated depository institutions.
            ``(2) Standards.--The Board, in issuing any regulation or 
        order pursuant to paragraph (1), shall consider appropriate 
        factors including--
                    ``(A) any burdens imposed by restrictions on 
                director and senior executive officer interlocks;
                    ``(B) the safety and soundness of depository 
                institutions and securities affiliates;
                    ``(C) unfair competition in securities activities;
                    ``(D) improper exchange of customer information; or
                    ``(E) harm to customers of securities affiliates or 
                depository institutions that could reasonably result 
                from director and senior officer interlocks.
            ``(3) Exception for small financial services holding 
        companies.--
                    ``(A) In general.--Notwithstanding paragraph (1), a 
                director or senior executive officer of a securities 
                affiliate may serve at the same time as a director or 
                senior executive officer of an affiliated depository 
                institution if that institution and all affiliated 
                depository institutions have, in the aggregate, total 
                assets of not more than $500,000,000.
                    ``(B) Inflation adjustment.--The dollar limitation 
                contained in subparagraph (A) shall be adjusted 
                annually after December 31, 1995, by the annual 
                percentage increase in the Consumer Price Index for 
                Urban Wage Earners and Clerical Workers published by 
                the Bureau of Labor Statistics.
            ``(4) Exception for certain regulation k affiliates.--
        Paragraph (1) shall not prohibit a director or senior executive 
        officer of a securities affiliate from serving at the same time 
        as a director or senior executive officer of a depository 
        institution which--
                    ``(A) is organized under section 25 or 25A of the 
                Federal Reserve Act;
                    ``(B) is an affiliate of such securities affiliate; 
                and
                    ``(C) principally engages in business outside the 
                United States.
    ``(f) Disclosure Required by Securities Affiliate.--
            ``(1) In general.--At the time a securities account is 
        opened, a securities affiliate shall conspicuously disclose in 
        writing to each of its customers that--
                    ``(A) securities sold, offered, or recommended by 
                the securities affiliate--
                            ``(i) are not deposits;
                            ``(ii) are not insured by the Federal 
                        Deposit Insurance Corporation;
                            ``(iii) are not guaranteed by an affiliated 
                        insured depository institution;
                            ``(iv) are not otherwise an obligation of 
                        an insured depository institution (unless such 
                        is the case); and
                            ``(v) with regard to any product that 
                        includes any investment component, are subject 
                        to investment risks including possible loss of 
                        principal invested;
                    ``(B) the securities affiliate is not an insured 
                depository institution, and is a corporation separate 
                from any insured depository institution; and
                    ``(C) the securities affiliate may be underwriting 
                or dealing in the securities being sold, offered or 
                recommended, and if so, would have a financial interest 
                in the transaction.
            ``(2) Form of disclosure.--The disclosures required by 
        paragraph (1) shall be made in clear and concise language 
        that--
                    ``(A) is readily comprehensible to customers of the 
                securities affiliate, and
                    ``(B) is designed to promote customer understanding 
                that uninsured investment products are not deposits 
                insured by the Federal Deposit Insurance Corporation.
            ``(3) Board authority.--Subject to paragraph (2), the Board 
        may, in the Board's discretion, prescribe disclosures in 
        addition to the disclosures prescribed by paragraph (1).
    ``(g) Disclosure Required by Insured Depository Institutions.--
            ``(1) In general.--No insured depository institution shall 
        knowingly express any opinion on the value of, or the 
        advisability of purchasing or selling, nonbanking products (as 
        defined by the Board) sold by the insured depository 
        institution or any affiliate of an insured depository 
        institution unless the insured depository institution 
        conspicuously discloses in writing to the customer that--
                    ``(A) the insured depository institution or 
                affiliate (whichever is applicable) is selling the 
                nonbanking product and has a financial interest in the 
                transaction (if such is the case);
                    ``(B) the nonbanking products--
                            ``(i) are not deposits;
                            ``(ii) are not insured by the Federal 
                        Deposit Insurance Corporation;
                            ``(iii) are not guaranteed by the 
                        institution or any other affiliated insured 
                        depository institution;
                            ``(iv) are not otherwise an obligation of 
                        an insured depository institution (unless such 
                        is the case); and
                            ``(v) with regard to any nonbanking product 
                        that includes any investment component, are 
                        subject to investment risks including possible 
                        loss of principal invested; and
                    ``(C) an affiliate, if involved, is not an insured 
                depository institution (unless such is the case), and 
                is a corporation separate from any insured depository 
                institution (unless such is not the case).
            ``(2) Form of disclosure.--The disclosures required by 
        paragraph (1) shall be made in clear and concise language 
        that--
                    ``(A) is readily comprehensible to customers of the 
                insured depository institution, and
                    ``(B) is designed to promote customer understanding 
                that nonbanking products are not deposits insured by 
                the Federal Deposit Insurance Corporation.
            ``(3) Customer acknowledgement of disclosure.--
                    ``(A) In general.--Whenever any insured depository 
                institution or securities affiliate opens an account 
                for the purpose of selling a nondeposit investment 
                product or products to a customer, such insured 
                depository institution or securities affiliate as the 
                case may be, shall obtain a 1-time acknowledgment of 
                receipt by the
                 customer of such disclosures, including the date of 
receipt with the customer's name, address, and the account number.
                    ``(B) Special rule for accredited investors.--In 
                the case of any customer who is, or meets the 
                requirements for, an accredited investor (as defined in 
                section 2(15) of the Securities Act of 1933), the 
                acknowledgment of the receipt of any disclosure 
                described in subparagraph (A) may be obtained by the 
                insured depository institution or securities affiliate 
                at the time any account is opened by such customer.
            ``(4) Board authority.--Subject to paragraph (2), the 
        Board, after consultation with the other appropriate Federal 
        banking agencies, may prescribe disclosures in addition to the 
        disclosures required by paragraph (1).
    ``(h) Improper Disclosure of Confidential Customer Information 
Prohibited.--
            ``(1) In general.--No depository institution subsidiary of 
        a financial services holding company shall disclose to any 
        affiliate of such institution which is not a depository 
        institution, and no affiliate of such company which is not a 
        depository institution shall disclose to any other affiliate 
        which is a depository institution or a subsidiary of such an 
        institution, any nonpublic customer information (including an 
        evaluation of the creditworthiness of an issuer or other 
        customer of that institution or securities affiliate), unless 
        it is clearly and conspicuously disclosed that such information 
        may be communicated among such persons and the customer is 
        given the opportunity, before the time that the information is 
        initially communicated, to direct that such information not be 
        communicated among such persons.
            ``(2) Definition.--For purposes of paragraph (1), the term 
        `nonpublic customer information' does not include--
                    ``(A) customers' names and addresses (unless a 
                customer has specified otherwise);
                    ``(B) information that could be obtained from 
                unaffiliated credit bureaus or similar companies in the 
                ordinary course of business; or
                    ``(C) information that is customarily provided to 
                unaffiliated credit bureaus or similar companies in the 
                ordinary course of business by--
                            ``(i) depository institutions not 
                        affiliated with securities affiliates; or
                            ``(ii) brokers and dealers not affiliated 
                        with depository institutions.
    ``(i) Underwriting Securities Representing Obligations Originated 
by Affiliate Restricted.--A securities affiliate shall not underwrite 
securities secured by or representing an interest in mortgages or other 
obligations originated or purchased by an affiliated depository 
institution or subsidiary of such an institution--
            ``(1) unless those securities--
                    ``(A) are rated by at least 1 unaffiliated, 
                nationally recognized statistical rating organization;
                    ``(B) are issued or guaranteed by the Federal Home 
                Loan Mortgage Corporation, the Federal National 
                Mortgage Association, or the Government National 
                Mortgage Association; or
                    ``(C) represent interests in securities described 
                in subparagraph (B); or
            ``(2) except as permitted by the Board.
    ``(j) Reciprocal Arrangements Prohibited.--No financial services 
holding company and no subsidiary of a financial services holding 
company may enter into any agreement, understanding, or other 
arrangement under which--
            ``(1) 1 financial services holding company (or subsidiary 
        of that financial services holding company) agrees to engage in 
        a transaction with, or on behalf of, another financial services 
        holding company (or subsidiary of that financial services 
        holding company), in exchange for
            ``(2) the agreement of the second financial services 
        holding company referred to in paragraph (1) (or a subsidiary 
        of that financial services holding company) to engage in any 
        transaction with, or on behalf of, the first financial services 
        holding company referred to in such paragraph (or any 
        subsidiary of that financial services holding company), for the 
        purpose of evading any requirement or restriction of Federal 
        law on transactions between, or for the benefit of, affiliates 
        of financial services holding companies.
    ``(k) Safeguards Apply to Certain Subsidiaries.--Except as provided 
in this section--
            ``(1) Securities affiliate.--No subsidiary of a securities 
        affiliate may do anything that this section prohibits the 
        securities affiliate from doing.
            ``(2) Depository institution.--No subsidiary of a 
        depository institution may do anything that this subsection 
        prohibits the institution from doing.
    ``(l) Authority to Modify and Impose Additional Safeguards; 
Interpretive Authority.--
            ``(1) In general.--The Board may, by regulation or order--
                    ``(A) adopt additional limitations, restrictions or 
                conditions on relationships or transactions among 
                depository institutions, their affiliates, and their 
                customers; and
                    ``(B) make any modification to any limitation, 
                restriction, or condition imposed under this section on 
                relationships or transactions among depository 
                institutions, the affiliates of insured depository 
                institutions, and the customers of such institutions or 
                affiliates, including modifications in addition to 
                those expressly provided for in this section.
            ``(2) Standards.--The Board may not exercise authority 
        under paragraph (1) unless the Board finds that such action is 
        consistent with the purposes of this Act, including--
                    ``(A) the avoidance of any significant risk to the 
                safety and soundness of depository institutions or the 
                Federal deposit insurance funds;
                    ``(B) the enhancement of the financial stability of 
                financial services holding companies;
                    ``(C) the prevention of the subsidization of 
                securities affiliates by depository institutions;
                    ``(D) the avoidance of conflicts of interest or 
                other abuses; and
                    ``(E) the application of the principle of national 
                treatment and equality of competitive opportunity 
                between securities affiliates owned or controlled by 
                domestic financial services holding companies and 
                securities affiliates owned or controlled by foreign 
                banks operating in the United States.
            ``(3) Biennial review.--Beginning 2 years after the date of 
        enactment of the Financial Services Competitiveness Act of 
        1995, the Board shall, on a biennial basis--
                    ``(A) review all restrictions established pursuant 
                to paragraph (1) to determine whether any such 
                restrictions are required any longer to carry out the 
                purposes of this Act; and
                    ``(B) modify or eliminate any such restriction that 
                the Board determines is no longer required to carry out 
                the purposes of this Act.
    ``(m) Compliance Programs Required.--
            ``(1) In general.--Each appropriate Federal banking and 
        agency the Securities and Exchange Commission shall establish a 
        program for--
                    ``(A) sharing information concerning compliance 
                with subtitle A of title I or subtitle A or B of title 
                II of the Financial Services Competitiveness Act of 
                1995, and the amendments made by such subtitles, by--
                            ``(i) brokers, dealers, investment 
                        advisers, or investment companies that are 
                        registered with the Securities and Exchange 
                        Commission that are affiliated with depository 
                        institutions, or are separately identifiable 
                        departments or divisions of depository 
                        institutions registered as brokers, dealers, or 
                        investment advisers; and
                            ``(ii) depository institutions and their 
                        affiliates;
                    ``(B) enforcing compliance with subtitle A of title 
                I of the Financial Services Competitiveness Act of 
                1995, and the amendments made by such subtitle and 
                paragraphs (4) and (5) of section 3(a) of the 
                Securities Exchange Act of 1934 by entities under its 
                supervision; and
                    ``(C) responding to any complaints from customers 
                about inappropriate cross-marketing of securities 
                products or inadequate disclosure.
            ``(2) Data collection.--
                    ``(A) In general.--The appropriate Federal banking 
                agencies, after consultation with and consideration of 
                the views of the Securities and Exchange Commission, 
                may require any depository institution that has 
                effected securities transactions pursuant to any 
                exception enumerated in paragraphs (4) and (5) of 
                section 3(a) of the Securities Exchange Act of 1934 to 
                identify the exceptions relied upon and to submit such 
                information necessary to monitor compliance under such 
                paragraphs.
                    ``(B) Commission access.--The appropriate Federal 
                banking agency shall make any information referred to 
                in subparagraph (A) available to the Securities and 
                Exchange Commission, upon the request of the 
                Commission.
                    ``(C) Compliance.--In implementing the provisions 
                of this paragraph, the appropriate Federal banking 
                agencies shall ensure that any information requests to 
                depository institutions take into account the size and 
                activities of the institutions and do not cause undue 
                reporting burdens.
            ``(3) Commission's enforcement authority.--Without limiting 
        in any way the authority of the appropriate Federal banking 
        agencies under this section, the Securities and Exchange 
        Commission shall have the authority to enforce any subsection 
        of this section against a securities affiliate as if such 
        subsection were a provision of the Securities Exchange Act of 
        1934 to the extent that the subsection applies with respect to 
        the conduct or activities of the securities affiliate.
            ``(4) Examination reports.--The appropriate Federal banking 
        agencies shall, to the extent practicable, use the reports of 
        examination of any broker, dealer, investment adviser, or 
        investment company made by or on behalf of the Securities and 
        Exchange Commission and reports made by or on behalf of a 
        registered securities association or national securities 
        exchange, and shall defer to such examinations for compliance 
        with the Federal securities laws.
            ``(5) Interpretations of the federal securities laws.--The 
        appropriate Federal banking agencies shall defer to the 
        Securities and Exchange Commission regarding all 
        interpretations and enforcement of the Federal securities laws 
        relating to the application of the Federal securities laws to 
        the activities and conduct of brokers, dealers, investment 
        advisers, and investment companies.
            ``(6) Notice of certain actions by sec.--The Securities and 
        Exchange Commission shall give notice to the appropriate 
        Federal banking agency upon the commencement of any 
        disciplinary or law enforcement proceedings by the Commission 
        and a copy of any order entered by the Commission against--
                    ``(A) any broker, dealer, or investment adviser 
                that--
                            ``(i) is registered with the Securities and 
                        Exchange Commission; and
                            ``(ii) is affiliated with, or is a 
                        separately identifiable department or division 
                        of, a depository institution;
                    ``(B) any investment company registered with the 
                Securities and Exchange Commission that is an affiliate 
                of or is advised by an investment adviser affiliated 
                with a depository institution or by a separately 
                identifiable department or division of a depository 
                institution that is a registered investment adviser; or
                    ``(C) any financial services holding company, 
                depository institution, or subsidiary of such company 
                or institution, if the proposed action relates to 
                subtitle A of title I or subtitle A or B of title II of 
                the Financial Services Competitiveness Act of 1995.
            ``(7) Notice of certain actions by appropriate federal 
        banking agencies.--Upon the commencement of any disciplinary or 
        law enforcement proceedings to enforce the provisions of 
        subtitle A of title I of the Financial Services Competitiveness 
        Act of 1995, or any amendment made by such subtitle, by an 
        appropriate Federal banking agency against any broker, dealer, 
        investment adviser, or investment company that is registered 
        under the Federal securities laws and is affiliated with a 
        depository institution or is a separately identifiable 
        department or division of a depository institution, the 
        appropriate Federal banking agency shall give notice to the 
        Securities and Exchange Commission of the proposed action.
            ``(8) Immediate action allowed before notice.--The notice 
        required under paragraph (6) or (7) may be provided promptly 
        after action by the Securities and Exchange Commission or the 
        appropriate Federal banking agency, if--
                    ``(A) the Commission determines that the protection 
                of investors requires immediate action by the 
                Commission and prior notice under paragraph (6) is not 
                practical under the circumstances; or
                    ``(B) the appropriate Federal banking agency 
                determines that concerns for the safety and soundness 
                of a depository institution or its affiliate require 
                immediate action by the agency and prior notice under 
                paragraph (7) is not practical under the circumstances.
            ``(9) Coordinated enforcement actions.--The Securities and 
        Exchange Commission and the appropriate Federal banking 
        agencies shall, to the extent practicable, coordinate 
        supervisory actions based on applicable law where the actions 
        are based on the same or related events or practices.
            ``(10) Investment companies not affiliated with a 
        depository institution.--The appropriate Federal banking agency 
        shall not have authority under this Act or any other provision 
        of law to inspect or examine any investment company registered 
        under the Federal securities laws that is not--
                    ``(A) affiliated with a depository institution; or
                    ``(B) advised by an investment adviser affiliated 
                with a depository institution or by a separately 
                identifiable department or division of a depository 
                institution that is a registered investment adviser.
            ``(11) Definition.--For purposes of this subsection, the 
        term `Federal securities laws' means the provisions of Federal 
        law governing securities activities that are within the 
        jurisdiction of the Securities and Exchange Commission under 
        the Securities Act of 1933, the Securities Exchange Act of 
        1934, the Investment Company Act of 1940, the Investment 
        Advisers Act of 1940, and the Trust Indenture Act of 1939.
    ``(n) Foreign Bank Firewalls.--
            ``(1) In general.--A foreign bank that operates a branch, 
        agency, or commercial lending company in the United States and 
        accepts no deposits in the United States, either directly or 
        through an affiliate, that are insured under the Federal 
        Deposit Insurance Act, and any affiliate of such foreign bank, 
        shall not be subject to the restrictions of any subsection of 
        this section, other than subsections (l) and (m), if the 
        conditions described in paragraph (2) are met.
            ``(2) Conditions for applicability of exception.--The 
        conditions of this paragraph have been met with respect to any 
        foreign bank referred to in paragraph (1) if--
                    ``(A) transactions between a securities affiliate 
                of such foreign bank and any branch, agency or 
                commercial lending company operated in the United 
                States by such foreign bank comply with the provisions 
                of sections 23A and 23B of the Federal Reserve Act as 
                if the foreign bank were a member bank; and
                    ``(B) such foreign bank has received a 
                determination from the Board that the bank meets 
                capital standards comparable to those established by 
                the Board for well capitalized financial services 
                holding companies, giving due regard to the principle 
                of national treatment and equality of competitive 
                opportunity, subject to any changes the Board may adopt 
                with respect to such standards.
            ``(3) Applicability of subsection (l) to foreign banks.--
        Any limitation, restriction, condition, or modification adopted 
        by the Board under subsection (l) may be applied by the Board 
        to--
                    ``(A) a foreign bank described in paragraph (1) 
                (and any company that owns or controls such foreign 
                bank);
                    ``(B) any branch, agency or commercial lending 
                company operated by such foreign bank in the United 
                States; or
                    ``(C) any other affiliate of such foreign bank in 
                the United States,
        if such limitation, restriction, condition, or modification is 
        applied by regulation or order of general applicability under 
        section 12(a)(2)(B)(ii) to wholesale financial institutions and 
        securities affiliates controlled by investment bank holding 
        companies, subject to such modifications, conditions, or 
        exemptions as the Board deems appropriate, giving due regard to 
        the principle of national treatment and equality of competitive 
        opportunity.''.
    (b) Amendment to the Federal Reserve Act.--Section 23B(b)(1)(B) of 
the Federal Reserve Act (12 U.S.C. 371c-l(b)(1)(B)) is amended by 
inserting ``and for 30 days thereafter'' after ``during the existence 
of any underwriting or selling syndicate''.
    (c) Exemption From Section 305(b) of the Federal Power Act.--
Section 305(b) of the Federal Power Act shall not apply to any person 
now holding, or proposing to hold, at the same time the position of 
officer or director of a public utility and the position of officer or 
director of a bank, trust company, banking association, or firm 
permitted by section 10 of the Financial Services Holding Company Act 
of 1995 (as amended by section 103(a) of this Act) to underwrite or 
participate in the marketing of securities (including commercial paper) 
of a public utility, if that bank, trust company, banking association, 
or firm does not underwrite or participate in the marketing of 
securities of the public utility for which the person serves, or 
proposes to serve, as an officer or director.
    (d) Amendment to the Right to Financial Privacy Act.--Section 
1112(e) of the Right to Financial Privacy Act (12 U.S.C. 3412(e)) is 
amended as follows--
            (1) by striking ``this title'' and inserting ``law''; and
            (2) by inserting ``, examination reports,'' after 
        ``financial records''.
    (e) Regulations to Preserve Separation of Banking and Commerce.--
Section 5(b) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1844(b)) is amended by inserting ``, including the protection of 
depository institutions and the separation of banking and commerce,'' 
after ``purposes of this Act''.

SEC. 105. OWNERSHIP OF SHARES OF CERTAIN COMPANIES BY FINANCIAL 
              SERVICES HOLDING COMPANIES.

    Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843) 
is amended by adding at the end the following new subsection:
    ``(k) Ownership of Shares of Certain Companies by Financial 
Services Holding Companies.--
            ``(1) Nonconforming financial companies.--Notwithstanding 
        section 4(a), a financial services holding company may retain 
        direct or indirect ownership or control of voting shares of any 
        company that--
                    ``(A) engages solely in activities that the Board 
                finds to be financial but which the Board has not 
                authorized under section 4(c)(8) (and such other 
                financial activities that the Board has authorized) 
                if--
                            ``(i) the financial services holding 
                        company acquired the shares of a company 
                        engaged in such activities or of each company 
                        to which the company engaged in such activities 
                        is a successor more than 2 years before the 
                        date that such financial services holding 
                        company becomes a financial services holding 
                        company;
                            ``(ii) the aggregate investment by the 
                        financial services holding company in shares of 
                        all such companies does not exceed 10 percent 
                        of the total consolidated capital and surplus 
                        of the financial services holding company as of 
                        the date that the holding company becomes a 
                        financial services holding company or as of the 
                        date of any additional investment by the 
                        financial services holding company in such 
                        shares;
                            ``(iii) more than 50 percent of the 
                        aggregate gross revenues of the financial 
                        services holding company and the subsidiaries 
                        of such holding company for each of the 2 
                        calendar years before the date the holding 
                        company becomes a financial services holding 
                        company were attributable to securities 
                        activities described in subparagraphs (A) and 
                        (B) of section 10(a)(1), as determined without 
                        taking into account any activities (other than 
                        securities activities) in which financial 
                        services holding companies were permitted to 
                        engage before the date of the enactment of the 
                        Financial Services Competitiveness Act of 1995; 
                        and
                            ``(iv) the company engaged in such 
                        activities continues to engage only in 
                        activities that such company conducted as of 
                        the date that such financial services holding 
                        company becomes a financial services holding 
                        company (or other activities permitted under 
                        section 4(c)(8) or section 10); or
                    ``(B) engages in activities not authorized under 
                section 4 if--
                            ``(i) the financial services holding 
                        company held the shares of any company engaged 
                        in such activities as of the date of the 
                        enactment of the Financial Services 
                        Competitiveness Act of 1995 and the financial 
                        services holding company was then exempt from 
                        the provisions of section 4 pursuant to section 
                        4(d) as of such date;
                            ``(ii) the company engaged in such 
                        activities continues to engage only in the same 
                        general lines of business and related 
                        activities that such company conducted as of 
                        the date of the enactment of the Financial 
                        Services Competitiveness Act of 1995 (or other 
                        activities permitted under section 4(c) or 
                        section 10); and
                            ``(iii) 80 percent of the aggregate gross 
                        revenues of the financial services holding 
                        company and the subsidiaries of such holding 
                        company as of the date of the enactment of the 
                        Financial Services Competitiveness Act of 1995 
                        was attributable to--
                                    ``(I) ownership and operation of 
                                depository institutions;
                                    ``(II) activities that are 
                                financial in nature as determined by 
                                the Board pursuant to section 4(c)(8);
                                    ``(III) activities permissible 
                                under section 10; and
                                    ``(IV) such other activities that 
                                would be permissible generally for the 
                                holding company as a financial services 
                                holding company (other than as an 
                                investment bank holding company).
            ``(2) Nonfinancial companies.--
                    ``(A) In general.--Notwithstanding section 4(a), a 
                financial services holding company described in 
                paragraph (1)(A)(iii) may, during the 5-year period 
                beginning on the date that the company becomes a 
                financial services holding company, retain direct or 
                indirect ownership or control of voting shares of any 
                company that the financial services holding company 
                owns or controls on the date such holding company 
                becomes a financial services holding company.
                    ``(B) Extension of divestiture period.--The Board 
                may extend the period described in subparagraph (A) for 
                an additional period not to exceed 5 years if the 
                Board--
                            ``(i) determines that such extension is 
                        necessary to avert substantial loss to the 
                        financial services holding company; and
                            ``(ii) finds that the financial services 
                        holding company has made good faith efforts to 
                        divest such shares.
                    ``(C) No expansion of nonfinancial companies prior 
                to divestiture.--Unless an acquisition or activity is 
                permitted in accordance with section 3 or 4(c)--
                            ``(i) no financial services holding 
                        company, and no company whose shares are owned 
                        or controlled by a financial services holding 
                        company in accordance with this paragraph, may 
                        acquire any interest in or assets of any other 
                        company, and
                            ``(ii) no company whose shares are owned or 
                        controlled by a financial services holding 
                        company pursuant to this paragraph may engage 
                        directly or indirectly in any activity that the 
                        company did not conduct on the day before the 
                        financial services holding company registered 
                        as a financial services holding company.
            ``(3) Restrictions on joint marketing.--No depository 
        institution (and no subsidiary of such institution) shall--
                    ``(A) offer or market, directly or indirectly 
                through any arrangement, any product or service of any 
                affiliate whose shares are owned or controlled by the 
                financial services holding company pursuant to this 
                subsection or section 10(j); or
                    ``(B) permit any of such depository institution's 
                or subsidiary's products or services to be offered or 
                marketed, directly or indirectly through any 
                arrangement, by or through any affiliate whose shares 
                are owned or controlled by the financial services 
                holding company pursuant to this subsection or section 
                10(j),
        unless, in a case involving an affiliate held under this 
        subsection, the product or service is permissible for financial 
        services holding companies to provide under section 4(c)(8) or 
        10.
            ``(4) Depository institution defined.--For purposes of 
        paragraph (3), the term `depository institution' includes a 
        foreign bank.''.

SEC. 106. PROVISIONS APPLICABLE TO LIMITED PURPOSE BANKS.

    (a) Exception to Restriction on Asset Growth of Nonbank Banks.--
            (1) In general.--Section 4(f)(3) of the Bank Holding 
        Company Act of 1956 (12 U.S.C. 1843(f)(3)) is amended by adding 
        at the end the following new subparagraph:
                    ``(D) Exception to restriction on asset growth, 
                activities, and certain cross-marketing restrictions.--
                            ``(i) Qualification for exception from 
                        growth restriction.--A bank controlled by a 
                        company described in paragraph (1) shall not be 
                        subject to the limitation contained in 
                        subparagraph (B)(iv) if the company meets the 
                        requirements of this subparagraph and the 
                        requirements of paragraph (14).
                            ``(ii) Qualification for exception from 
                        activities restriction.--Notwithstanding 
                        subparagraph (B)(i), a bank controlled by a 
                        company described in paragraph (1) that meets 
                        the requirements of clause (i) may engage in an 
                        activity authorized under applicable law (other 
                        than an activity that would have resulted in 
                        the institution being a bank for purposes of 
                        this Act, as in effect on the day before the 
                        date of the enactment of the Competitive 
                        Equality Banking Act of 1987, based on the 
                        activities each bank conducted on March 5, 
                        1987, as reported to the Board) if such bank, 
                        at least 60 days before commencing such 
                        activity, has notified the Board of the bank's 
                        intention to commence such activity and 
                        either--
                                    ``(I) the Board has notified such 
                                bank that the Board will not disapprove 
                                the proposed activity as unsafe or 
                                unsound; or
                                    ``(II) the Board has not, within 60 
                                days after receiving such notice, 
                                disapproved the proposal on the basis 
                                of such criteria.
                            ``(iii) Qualification for exception from 
                        cross-marketing restriction.--Notwithstanding 
                        subparagraph (B)(ii), a bank controlled by a 
                        company described in paragraph (1) that meets 
                        the requirements of clause (i) may offer or 
                        market products or services of an affiliate or 
                        permit the bank's products or services to be 
                        offered or marketed in connection with products 
                        or services of an affiliate if such products or 
                        services are offered or marketed only to the 
                        extent permissible for banks or financial 
                        services holding companies to provide by law, 
                        regulation, or order under paragraph (8) or 
                        (15) of subsection (c).
                            ``(iv) Exception from divestiture 
                        requirement for banks restored to well 
                        capitalized level.--If any bank controlled by a 
                        company that meets the requirements of clause 
                        (i) ceases to be well capitalized, the company 
                        shall divest control of such bank in accordance 
                        with paragraph (4) unless--
                                    ``(I) within 12 months after the 
                                date the bank ceases to be well 
                                capitalized, the capital of the bank is 
                                restored to the well capitalized level; 
                                and
                                    ``(II) after the end of such 12-
                                month period, the bank remains well 
                                capitalized, subject to the capital 
                                restoration requirements in subclause 
                                (I).
                            ``(v) Action required if bank ceases to be 
                        adequately capitalized.--If any bank controlled 
                        by a company that meets the requirements of 
                        clause (i) ceases to be adequately capitalized, 
                        the company shall, within 30 days after the 
                        date as of which the bank ceases to be 
                        adequately capitalized--
                                    ``(I) execute an agreement with the 
                                Board to divest control of such bank in 
                                accordance with paragraph (4); or
                                    ``(II) restore the capital of the 
                                bank to at least the adequately 
                                capitalized level.''.
            (2) Qualifications for companies under paragraph (3)(d).--
        Section 4(f) of the Bank Holding Company Act of 1956 (12 U.S.C. 
        1843(f)) is amended by adding at the end the following new 
        paragraph:
            ``(14) Qualifications for companies under paragraph 
        (3)(d).--A company meets the requirements of paragraph 
        (3)(D)(i) if--
                    ``(A) the company (based on consolidated revenues) 
                engages in activities that are financial (including 
                activities not authorized under subsection (c)(8)) and 
                predominantly in--
                            ``(i) banking;
                            ``(ii) activities that the Board has 
                        determined under subsection (c)(8) to be 
                        financial in nature or incidental to such 
                        financial activities;
                            ``(iii) activities permitted under 
                        subparagraph (A) or (B) of section 10(a)(1); 
                        and
                            ``(iv) other activities that would be 
                        permissible for such company as a financial 
                        services holding company (other than as an 
                        investment bank holding company);
                    ``(B) all insured depository institutions 
                controlled by such company are well capitalized and 
                well managed;
                    ``(C) the bank and any affiliate of the bank that 
                is engaged in securities activities described in 
                section 10(a) comply with the safeguards contained in 
                section 11 as if that affiliate were a securities 
                affiliate; and
                    ``(D) the company has provided at least 60 days 
                prior written notice to the Board and, during that 
                period, the Board has not disapproved the proposal.''.
    (b) Amended Divestiture Procedure for Certain Companies.--Section 
4(f)(4) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(f)(4)) 
is amended by adding at the end the following: ``If any company 
described in paragraph (1) which meets the requirements of paragraph 
(3)(D)(i) fails to qualify for the exemption provided under paragraph 
(2), such company shall divest, in accordance with this paragraph, 
control of each bank the company controls unless, within 12 months 
after the date that the company fails to comply with the provisions of 
paragraph (2), the company has corrected the condition or ceased the 
activity that led to the failure to comply.''.
    (c) Conversion of Certain Nonbank Holding Companies to Financial 
Services Holding Companies.--Section 4(f) of the Bank Holding Company 
Act of 1956 (12 U.S.C. 1843(f)) is amended by inserting after
 paragraph (14) (as added by subsection (a)(2)) the following new 
paragraph:
            ``(15) Conversion of certain companies to financial 
        services holding companies.--
                    ``(A) In general.--During the 18-month period 
                beginning on the date of the enactment of the Financial 
                Services Competitiveness Act of 1995, any company 
                described in paragraph (1) may become a financial 
                services holding company if--
                            ``(i) the company (on a consolidated basis) 
                        engages in activities that are financial 
                        (including activities not authorized under 
                        subsection (c)(8)) and predominantly in--
                                    ``(I) banking;
                                    ``(II) activities that the Board 
                                has determined under subsection (c)(8) 
                                to be financial in nature or incidental 
                                to such financial activities;
                                    ``(III) activities permitted under 
                                subparagraph (A) or (B) of section 
                                10(a)(1); and
                                    ``(IV) other activities that would 
                                be permissible for such company as a 
                                financial services holding company 
                                (other than an investment bank holding 
                                company);
                            ``(ii) all insured depository institutions 
                        controlled by such company are well capitalized 
                        and well managed;
                            ``(iii) the company provides written notice 
                        to the Board under sections 4 and 10 at least 
                        60 days before the company becomes a financial 
                        services holding company; and
                            ``(iv) the Board does not object to such 
                        transaction before the end of such 60-day 
                        period.
                    ``(B) Retention of financial companies.--
                            ``(i) In general.--Notwithstanding 
                        subsection (a), a company that becomes a 
                        financial services holding company pursuant to 
                        subparagraph (A) may retain direct or indirect 
                        ownership or control of voting shares of any 
                        company that engages solely in activities that 
                        the Board finds to be financial but which the 
                        Board has not authorized under subsection 
                        (c)(8) (and such other financial activities 
                        that the Board has authorized) if the financial 
                        services holding company acquired the shares of 
                        such company, or of each company to which such 
                        company is a successor, before January 1, 1995.
                            ``(ii) Limits on expansion following 
                        registration.--A company that becomes a 
                        financial services holding company pursuant to 
                        this paragraph, and any company whose shares 
                        are owned or controlled by a financial services 
                        holding company pursuant to this paragraph, 
                        shall be subject to the limitations contained 
                        in paragraphs (2)(C) and (3) of section 4(k) as 
                        if the activities or shares of such company 
                        were conducted or held pursuant to section 
                        4(k)(2).
                            ``(iii) Period to conform other 
                        activities.--Notwithstanding subsection (a), a 
                        company that becomes a financial services 
                        holding company pursuant to subparagraph (A) 
                        may retain direct or indirect ownership or 
                        control of voting shares of any company not 
                        otherwise permitted under this section for the 
                        period provided in, and subject to the 
                        conditions contained in, paragraphs (2) and (3) 
                        of section 4(k).
                    ``(C) Election for reduced supervision.--Any 
                company that becomes a financial services holding 
                company pursuant to subparagraph (A) may elect to be 
                governed by the provisions of paragraphs (3), (4), (5), 
                and (6) of section 5(g), subject to the requirements of 
                such section, if--
                            ``(i) the company, and any insured 
                        depository institution controlled by such 
                        company, meet the requirements of section 5(g) 
                        (other than the requirements of paragraph 
                        (2)(A) of such section);
                            ``(ii) the company does not acquire more 
                        than 5 percent of the shares of any additional 
                        depository institution after the date that such 
                        company becomes a financial services holding 
                        company; and
                            ``(iii) no depository institution 
                        controlled by such company acquires, 
                        establishes, or operates an additional branch 
                        office after the date that the company becomes 
                        a financial services holding company.''.

SEC. 107. SECURITIES COMPANY AFFILIATIONS OF FDIC--INSURED BANKS.

    (a) In General.--Section 18 of the Federal Deposit Insurance Act 
(12 U.S.C. 1828) is amended by adding at the end the following new 
subsections:
    ``(s) Securities Affiliations of Banks.--
            ``(1) In general.--A bank shall not be an affiliate of any 
        company that, directly or indirectly, acts as an underwriter or 
        dealer of any security, other than--
                    ``(A) a securities affiliate in accordance with 
                section 10 of the Financial Services Holding Company 
                Act of 1995; or
                    ``(B) a company that underwrites or deals only in 
                securities described in section 10(g) of the Financial 
                Services Holding Company Act of 1995.
            ``(2) Exceptions.--
                    ``(A) Certain banks not included.--For purposes of 
                this subsection, the term `bank' does not include--
                            ``(i) an insured bank described in 
                        subparagraph (D), (F), or (H) of section 
                        2(c)(2) of the Financial Services Holding 
                        Company Act of 1995; and
                            ``(ii) a Federal branch or an insured 
                        branch (as defined in section 3 of the Federal 
                        Deposit Insurance Act).
                    ``(B) Affiliations with edge act and agreement 
                corporations.--Paragraph (1) shall not apply with 
                respect to the affiliation of a bank with a company 
                held pursuant to section 25 or 25A of the Federal 
                Reserve Act or section 4(c)(13) of the Financial 
                Services Holding Company Act of 1995.
            ``(3) Grandfather provision.--This subsection shall not 
        apply with respect to--
                    ``(A) an affiliation that existed on January 1, 
                1995; or
                    ``(B) any new affiliation by an insured bank that 
                has an affiliation that would be prohibited if the 
                affiliation were not covered by subparagraph (A).
            ``(4) Definitions.--For purposes of this subsection, the 
        following definitions shall apply:
                    ``(A) Broker.--The term `broker' has the meaning 
                given to such term in section 3(a)(4) of the Securities 
                Exchange Act of 1934.
                    ``(B) Dealer.--The term `dealer' has the meaning 
                given to such term in section 3(a)(5) of the Securities 
                Exchange Act of 1934.
                    ``(C) Security.--The term `security' has the 
                meaning given to such term in section 10(k) of the 
                Financial Services Holding Company Act of 1995.
                    ``(D) Underwriter.--The term `underwriter' has the 
                meaning given to such term in section 2(11) of the 
                Securities Act of 1933.
            ``(5) Affiliate.--For purposes of this subsection, a 
        separately identifiable department or division (as defined in 
        section 3(a) of the Securities Exchange Act of 1934) of a bank 
        shall be deemed to be a company which is an affiliate of the 
        bank.
    ``(t) Broker-Dealer Registration.--An insured bank may not use the 
United States mails or any means or instrumentality of interstate 
commerce to act as a broker or dealer without registration under the 
Securities Exchange Act of 1934--
            ``(1) except to the extent permitted under the 
        circumstances described in paragraph (4) or (5) of section 3(a) 
        of such Act; or
            ``(2) unless otherwise exempt from registrations as a 
        broker or dealer pursuant to regulations prescribed by the 
        Securities and Commission.
    ``(u) Examination Reports.--The Federal banking agencies shall, to 
the maximum extent practicable, use the reports of examination of any 
broker, dealer, investment adviser, or investment company made by or on 
behalf of the Securities and Exchange Commission and reports made by or 
on behalf of a registered securities association or national securities 
exchange and shall defer to such examination for compliance with 
Federal securities laws.''.
    (b) Study of Risks to Deposit Insurance System.--
            (1) Study required.--During the 6-month period beginning 18 
        months after the date of the enactment of the Financial 
        Services Competitiveness Act of 1995, the Federal Deposit 
        Insurance Corporation shall conduct a study of the risks posed 
        to the deposit insurance funds by--
                    (A) the affiliation of insured depository 
                institutions with securities affiliates and other 
                institutions described in subsection (s)(1) of section 
                18 of the Federal Deposit Insurance Act (as added by 
                subsection (a) of this section); or
                    (B) any activity described in section 10(a) (as 
                added by section 103(a) of this Act) of the Financial 
                Services Holding Company Act of 1995 (as so 
                redesignated by section 128(a) of this Act) in which 
                insured depository institutions may engage in 
                accordance with any provision of Federal or State law.
            (2) Report to congress and gao.--
                    (A) In general.--Before the end of the 6-month 
                period described in paragraph (1), the Federal Deposit 
                Insurance Corporation shall submit a report to the 
                Congress on the findings and conclusions of the 
                Corporation with respect to the study conducted under 
                such paragraph, together with such conclusions for 
                administrative or legislative action as the Corporation 
                may determine to be appropriate.
                    (B) Details of specific risks.--If the Federal 
                Deposit Insurance Corporation concludes that certain 
                kinds of activities not specifically authorized by 
                statute for insured depository institutions before the 
                date of the enactment of this Act, or the affiliation 
                of insured depository institutions with securities 
                affiliates engaged in certain kinds of securities 
                activities, pose a greater risk to the deposit 
                insurance funds than activities specifically authorized 
                by statute for national banks before January 1, 1995, 
                the report submitted under subparagraph (A) shall 
                contain a detailed explanation of the basis for such 
                conclusion.
                    (C) Transmittal to gao.--The Federal Deposit 
                Insurance Corporation shall transmit a copy of the 
                report referred to in paragraph (1) to the Comptroller 
                General.
            (3) Action by fdic.--If the Federal Deposit Insurance 
        Corporation concludes that any activity or affiliation with 
        respect to insured depository institutions poses a greater risk 
        to any deposit insurance fund than the risk posed by activities 
        specifically authorized by statute for national banks before 
        January 1, 1995, the Federal Deposit Insurance Corporation 
        shall treat such conclusion as a factor to be considered in 
        setting semiannual assessments under section 7(b)(2)(A) of the 
        Federal Deposit Insurance Act.
            (4) Evaluation of report by gao.--The Comptroller General 
        shall--
                    (A) evaluate the report transmitted by the Federal 
                Deposit Insurance Corporation to the Comptroller 
                General under paragraph (2); and
                    (B) submit a report to the Congress on such 
                evaluation, including a discussion on the methodology 
                used by the Corporation to assess risks posed by 
                nonbanking activities to the deposit insurance funds.

SEC. 108. AUTHORITY TO TERMINATE GRANDFATHER RIGHTS UNDER THE 
              INTERNATIONAL BANKING ACT OF 1978.

    Section 8(c) of the International Banking Act of 1978 (12 U.S.C. 
3106(c)) is amended by adding at the end the following new paragraph:
            ``(3) Parity in conduct of authorized securities 
        activities.--
                    ``(A) In general.--Notwithstanding the provisions 
                of paragraph (1) or any other provision of law, any 
                authority conferred under this subsection on any 
                foreign bank or company with respect to securities 
                activities authorized for financial services holding 
                companies in the United States shall terminate 30 days 
                following approval by the Board of an application by 
                such foreign bank or company under section 10 of the 
                Financial Services Holding Company Act of 1995.
                    ``(B) Authority to impose conditions.--If a foreign 
                bank or company that engages directly or through an 
                affiliate in any securities activity pursuant to 
                paragraph (1) has not received approval by the Board 
                under section 10 of the Financial Services Holding 
                Company Act of 1995 to control a securities affiliate 
                by the end of the 3-year period beginning on the 
                effective date of such Act, the Board may impose such 
                limitations and restrictions, including the termination 
                of any activities conducted under paragraph (1) or a 
                requirement that such activities be conducted in 
                compliance with the safeguards of section 11 of such 
                Act, as the Board considers appropriate consistent with 
                the purposes of this Act and the Financial Services 
                Holding Company Act of 1995.''.

SEC. 109. EFFECT ON STATE LAWS PROHIBITING THE AFFILIATION OF BANKS AND 
              SECURITIES COMPANIES.

    (a) In General.--Section 7 of the Bank Holding Company Act of 1956 
(12 U.S.C. 1846) is amended by adding at the end the following new 
subsection:
    ``(c) Affiliations and Activities.--No State may prohibit or 
limit--
            ``(1) the affiliation of a bank or financial services 
        holding company with a securities affiliate solely because the 
        securities affiliate is engaged in activities described in 
        subparagraph (A) or (B) of section 10(a)(1); or
            ``(2) the insurance or other activities of a subsidiary of 
        a financial services holding company solely because the 
        financial services holding company is no longer exempt under 
        this Act pursuant to section 4(d).''.
    (b) Bank Activities.--No provision of this Act, and no amendment 
made by this Act to any other provision of law (other than section 10 
or 11 of the Financial Services Holding Company Act of 1995 (as added 
by sections 103 and 104 of this Act), section 18(s) of the Federal 
Deposit Insurance Act (as added by section 107 of this Act), or any 
amendments made by title II of this Act), may be construed as affecting 
the authority of any bank to engage in any activity authorized for such 
bank under the law of such bank's home State (as defined in section 
2(o)(4) of the Financial Services Holding Company Act of 1995).

SEC. 110. MUNICIPAL SECURITIES.

    The paragraph designated the ``Seventh'' of section 5136 of the 
Revised Statutes of the United States (12 U.S.C. 24) is amended by 
adding at the end the following new sentences: ``Notwithstanding any 
limitation and restriction contained in this paragraph relating to 
dealing, underwriting, and purchasing securities and in addition to any 
authorization in this paragraph to deal in, underwrite or purchase 
securities, a national bank may deal in, underwrite, and purchase for 
such association's own account any obligation (including general and 
limited obligation bonds, revenue bonds and obligations that satisfy 
the requirements of section 142(b)(1) of the Internal Revenue Code of 
1986) issued by or on behalf of any State or political subdivision of a 
State, including any municipal corporate instrumentalities of 1 or more 
States, or any public agency or authority of any State or political 
subdivision of a State, if the national bank--
            ``(1) is well capitalized (as defined in section 38(b) of 
        the Federal Deposit Insurance Act); and
            ``(2) engages in the business of banking.''.
SEC. 111. INTERAGENCY AGREEMENT RELATING TO RETAIL SALES OF CERTAIN 
              NONDEPOSIT INVESTMENT PRODUCTS.

    Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is 
amended by inserting after subsection (u) (as added by section 107 of 
this Act) the following new subsection:
    ``(v) Joint Standards Relating to Retail Sales of Certain 
Nondeposit Investment Products.--
            ``(1) In general.--The appropriate Federal banking agencies 
        shall jointly prescribe, after consulting with and considering 
        the views of the Securities and Exchange Commission, standards 
        applicable to any insured depository institution which--
                    ``(A) is not registered as a broker under the 
                Securities Exchange Act of 1934; and
                    ``(B) effects transactions in securities issued by 
                an investment company or annuities.
            ``(2) Scope of standards.--The standards required under 
        paragraph (1) with respect to securities and annuities referred 
        to in such paragraph shall, at a minimum, establish 
        requirements with respect to--
                    ``(A) sales practices;
                    ``(B) disclosures and advertising in connection 
                with transactions in such securities and annuities, 
                including--
                            ``(i) the content, form, and timing of any 
                        such disclosure; and
                            ``(ii) disclaimers concerning the 
                        noninsured status of the security or annuity;
                    ``(C) the compensation of sales personnel with 
                respect to referrals or transactions;
                    ``(D) the training of and qualifications for 
                personnel involved in such transactions, including 
                training in making an accurate judgment about the 
                suitability of a particular investment product for a 
                prospective customer; and
                    ``(E) the setting in which and the circumstances 
                under which transactions may be effected, and referrals 
                made, by sales personnel with respect to such 
                securities and annuities.''.

SEC. 112. EFFECTIVE DATE.

    The amendments made by this subtitle shall take effect at the end 
of the 90-day period beginning on the date of the enactment of this 
Act.

             Subtitle B--Investment Bank Holding Companies

SEC. 116. INVESTMENT BANK HOLDING COMPANIES.

    (a) Definitions.--
            (1) In general.--Section 2 of the Bank Holding Company Act 
        of 1956 (12 U.S.C. 1842) is amended by adding at the end the 
        following new subsections:
    ``(s) Wholesale Financial Institution.--The term `wholesale 
financial institution' means any institution that
 is an uninsured State member bank authorized pursuant to section 9B of 
the Federal Reserve Act.
    ``(t) Investment Bank Holding Company.--The term `investment bank 
holding company' means any financial services holding company that--
            ``(1) controls a company engaged in underwriting corporate 
        equity securities pursuant to section 10;
            ``(2) controls a wholesale financial institution; and
            ``(3) if the company is a foreign bank that operates a 
        branch, agency or commercial lending company in the United 
        States, or is a company that controls such foreign bank, is 
        treated as an investment bank holding company because such bank 
        or company meets the criteria in section 12(b) and has received 
        the determination required by such section.''.
            (2) Definition of bank includes wholesale financial 
        institution.--Section 2(c)(1) of the Bank Holding Company Act 
        of 1956 (12 U.S.C. 1841(c)(1)) is amended by adding at the end 
        the following new subparagraph:
                    ``(C) A wholesale financial institution.''.
    (b) Investment Bank Holding Companies.--The Bank Holding Company 
Act of 1956 (12 U.S.C. 1841 et seq.) is amended by inserting after 
section 11 (as added by section 104 of this Act) the following new 
section:

``SEC. 12. INVESTMENT BANK HOLDING COMPANIES.
    ``(a) Permissible Affiliations for Investment Bank Holding 
Companies.--
            ``(1) Financial activities.--
                    ``(A) Activities authorized.--An investment bank 
                holding company may directly or indirectly own or 
                control shares of any company engaged in any activity 
                the Board has determined to be financial in nature or 
                incidental to a financial activity (other than 
                activities expressly limited under subsection (c)(8)), 
                or any activity in compliance with subparagraph (B) or 
                (C).
                    ``(B) Incidental activities.--
                            ``(i) In general.--Notwithstanding 
                        subparagraph (A), the aggregate investment by 
                        an investment bank holding company in shares of 
                        companies that engage in nonfinancial 
                        activities and financial activities (other than 
                        those otherwise permitted under this section) 
                        shall not at any time exceed 7.5 percent (or 
                        such greater percentage as the Board may 
                        determine to be appropriate) of the 
                        consolidated total risk-weighted assets of the 
                        investment bank holding company (excluding 
                        assets of companies held pursuant to this 
                        subparagraph), except that the amount invested 
                        by the investment bank holding company in any 1 
                        company (including all affiliates of such 
                        company other than preexisting affiliates of 
                        such investment bank holding company) may not 
                        exceed the amount which is equal to 25 percent 
                        of the total capital and surplus of such 
                        investment bank holding company.
                            ``(ii) Applicability to successor in 
                        interest.--Any successor to any investment bank 
                        holding company referred to in clause (i) may 
                        retain any investments made pursuant to this 
                        subparagraph--
                                    ``(I) during the 5-year period 
                                beginning on the date the succession is 
                                consummated; and
                                    ``(II) with the consent of the 
                                Board, for an additional period not to 
                                exceed 5 years after the 5-year period 
                                referred to in subclause (I),
                        unless the Board determines that the retention 
                        of such investment would jeopardize the safety 
                        and soundness of any insured depository 
                        institution affiliate of such successor.
                            ``(iii) Cross marketing restrictions.--A 
                        wholesale financial institution shall not--
                                    ``(I) offer or market, directly or 
                                through any arrangement, any product or 
                                service of an affiliate whose shares 
                                are owned or controlled by the 
                                investment bank holding company 
                                pursuant to this subparagraph or 
                                subparagraph (C); or
                                    ``(II) permit any of such wholesale 
                                financial institution's or subsidiary's 
                                products or services to be offered or 
                                marketed, directly or through any 
                                arrangement, by or through any such 
                                affiliate.
                            ``(iv) Use of common name.--An investment 
                        bank holding company shall not permit a 
                        wholesale financial institution to adopt a name 
                        which is the same as or similar to, or a 
                        variation of, the name or title of an affiliate 
                        engaged in activities pursuant to subparagraph 
                        (B).
                    ``(C) Commodities.--
                            ``(i) In general.--An investment bank 
                        holding company predominantly engaged as of 
                        January 1, 1995, in securities activities in 
                        the United States (or any successor to any such 
                        company) may engage in, or directly or 
                        indirectly own or control shares of a company 
                        engaged in, activities related to the trading, 
                        sale, or investment in commodities and 
                        underlying physical properties that were not 
                        permissible for bank holding companies to 
                        conduct in the United States as of January 1, 
                        1995, provided such investment bank holding 
                        company, or any subsidiary of such holding 
                        company, was engaged directly, indirectly, or 
                        through any such company in any of such 
                        activities as of January 1, 1995, in the United 
                        States.
                            ``(ii) Limitation.--Notwithstanding 
                        subparagraphs (A) and (B), the aggregate 
                        investment by an investment bank holding 
                        company in activities under this subparagraph 
                        (other than those otherwise permitted under 
                        this section) shall not at any time exceed 5 
                        percent of the total consolidated assets of the 
                        investment bank holding company.
                            ``(iii) Successor defined.--For purposes of 
                        this subparagraph and subparagraph (B), the 
                        term `successor' means, with respect to any 
                        investment bank holding company described in 
                        clause (i), any company that merges with, or 
                        acquires control of, such investment bank 
                        holding company.
                    ``(D) Qualified investor in an investment bank 
                holding company.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of Federal or State law, a 
                        qualified investor--
                                    ``(I) shall not be, or be deemed to 
                                be, an investment bank holding company, 
                                a financial services holding company, a 
                                bank holding company, or any similar 
                                organization; and
                                    ``(II) shall not be deemed to 
                                control any such company or 
                                organization or any subsidiary of any 
                                such company or organization (other 
                                than for
                                 purposes of section 23A and 23B of the 
Federal Reserve Act),
                        by virtue of the investor's ownership or 
                        control of shares of an investment bank holding 
                        company.
                            ``(ii) Qualified investor defined.--For 
                        purposes of this subparagraph, the term 
                        `qualified investor' means any United States 
                        company (including a parent company and all 
                        subsidiaries of which the parent company holds 
                        at least 80 percent of the total voting equity 
                        securities) which since February 27, 1995, has 
                        directly or indirectly owned or controlled 
                        shares of capital stock representing at least 
                        10 percent, and not more than 45 percent, of 
                        the outstanding voting shares or voting power 
                        of a company that--
                                    ``(I) becomes an investment bank 
                                holding company or a subsidiary of an 
                                investment bank holding company; and
                                    ``(II) before such company became 
                                an investment bank holding company or a 
                                subsidiary of an investment bank 
                                holding company, had more than 50 
                                percent of the company's assets 
                                employed directly or indirectly in 
                                securities activities.
                            ``(iii) Cross-marketing and common name.--A 
                        wholesale financial institution shall not--
                                    ``(I) offer or market products or 
                                services of a qualified investor in the 
                                investment bank holding company of 
                                which the wholesale financial 
                                institution is an affiliate;
                                    ``(II) permit the institution's 
                                products or services to be offered or 
                                marketed in connection with products or 
                                services of such qualified investor; or
                                    ``(III) adopt a name which is the 
                                same as or similar to, or a variation 
                                of, the name or title of such qualified 
                                investor.
                            ``(iv) Examination and reporting.--
                        Notwithstanding any other provision of law, the 
                        Board may conduct examinations of, or require 
                        reports from, a qualified investor only to the 
                        extent that the Board reasonably determines 
                        that such examinations or reports are 
                        necessary--
                                    ``(I) to ensure compliance with 
                                this subparagraph; or
                                    ``(II) to the extent that the 
                                qualified investor is an affiliate of a 
                                wholesale financial institution for 
                                purposes of section 23A of the Federal 
                                Reserve Act, to ensure compliance with 
                                restrictions imposed by law or 
                                regulation on transactions between the 
                                qualified investor and such wholesale 
                                financial institution.
                    ``(E) Special rule.--An investment bank holding 
                company that owns and controls shares of a company 
                pursuant to subparagraph (B) or (C) may not own or 
                control shares of a company pursuant to section 4(k).
                    ``(F) Consolidated total risk-weighted assets.--For 
                purposes of this paragraph, the following definitions 
                shall apply:
                            ``(i) In general.--The term `consolidated 
                        total risk-weighted assets' shall have the 
                        meaning given to such term in regulations 
                        prescribed by the Board as in effect on the 
                        date of the enactment of the Financial Services 
                        Competitiveness Act of 1995.
                            ``(ii) Application to foreign banks.--In 
                        the case of a foreign bank or a company that 
                        owns or controls a foreign bank, the term 
                        `consolidated total risk-weighted assets' means 
                        total risk-weighted assets held by the foreign 
                        bank or company in the United States in any 
                        United States branch, agency, or commercial 
                        lending company subsidiary, any depository 
                        institution controlled by the foreign bank or 
                        company, any subsidiary held under the 
                        authority of this section, section 3, 4, or 10 
                        (other than paragraph (9) or (13) of section 
                        4(c)), or section 25 or 25A of the Federal 
                        Reserve Act.
            ``(2) Securities activities.--
                    ``(A) Institutions must be well capitalized.--The 
                Board shall disapprove a notice under section 10 by an 
                investment bank holding company (or a company seeking 
                to become an investment bank holding company) to 
                acquire a securities affiliate if any wholesale 
                financial institution controlled by the investment bank 
                holding company is not well capitalized or would not be 
                well capitalized following the transaction.
                    ``(B) Transactions with affiliates.--
                            ``(i) In general.--A wholesale financial 
                        institution controlled by an investment bank 
                        holding company shall be treated as a bank for 
                        purposes of the provisions of sections 23A and 
                        23B of the Federal Reserve Act.
                            ``(ii) Other restrictions regarding 
                        securities affiliates determined by the 
                        board.--A securities affiliate of an investment 
                        bank holding company, and a wholesale financial 
                        institution controlled by an investment bank 
                        holding company, shall not be subject to the 
                        provisions of section 11, except that the 
                        securities affiliate and wholesale financial 
                        institution shall be subject to subsections (l) 
                        and (m) of such section in the same manner and 
                        to the same extent such paragraphs would apply 
                        if the wholesale financial institution were an 
                        insured depository institution.
            ``(3) Limitation on affiliation with insured depository 
        institutions.--An investment bank
         holding company may not, directly or indirectly, own or 
control--
                    ``(A) any bank, other than a wholesale financial 
                institution;
                    ``(B) any savings association;
                    ``(C) any institution described in section 2(c)(2) 
                (other than subparagraphs (C) and (G) of such section); 
                or
                    ``(D) any institution that accepts--
                            ``(i) initial deposits of $100,000 or less, 
                        other than on an incidental or occasional 
                        basis, or
                            ``(ii) deposits that are insured under the 
                        Federal Deposit Insurance Act.
            ``(4) No deposit insurance fund liability.--No Federal 
        deposit insurance funds may be used in connection with the 
        failure of, or any proposed assistance to, a wholesale 
        financial institution or an investment bank holding company.
            ``(5) Capital of ibhc.--
                    ``(A) In general.--The Board shall not impose any 
                capital requirement on investment bank holding 
                companies or subsidiaries of such companies (other than 
                depository institutions) unless any such requirement is 
                based upon appropriate risk-weighing considerations.
                    ``(B) Applicable accounting principles.--In 
                applying any capital standard to investment bank 
                holding companies, or subsidiaries of such companies, 
                the Board shall utilize uniform accounting principles 
                consistent with generally accepted accounting 
                principles in accordance with section 37(a)(2) of the 
                Federal Deposit Insurance Act.
    ``(b) Qualification of Foreign Bank as Investment Bank Holding 
Company.--
            ``(1) In general.--Any foreign bank that--
                    ``(A) operates a branch, agency or commercial 
                lending company in the United States (and any company 
                that owns or controls such foreign bank), including a 
                foreign bank that does not own or control a wholesale 
                financial institution; and
                    ``(B) controls a security affiliate that engages in 
                underwriting corporate equity securities,
        may request a determination from the Board that such bank or 
        company be treated as an investment bank holding company.
            ``(2) Conditions for treatment as an investment bank 
        holding company.--A foreign bank and a company that owns or 
        controls a foreign bank may not be treated as an investment 
        bank holding company unless the bank and company meet and 
        continue to meet the following criteria:
                    ``(A) No insured deposits.--No deposits held 
                directly by a foreign bank or through an affiliate are 
                insured under the Federal Deposit Insurance Act.
                    ``(B) Capital standards.--The foreign bank meets 
                risk-based capital standards comparable to the capital 
                standards required for a wholesale financial 
                institution, giving due regard to the principle of 
                national treatment and equality of competitive 
                opportunity.
                    ``(C) Transactions with affiliates.--Transactions 
                between a branch, agency, or commercial lending company 
                subsidiary of the foreign bank in the United States, 
                and any securities affiliate or company in which the 
                foreign bank (or any company that owns or controls such 
                foreign bank) has invested pursuant to subsection 
                (a)(1)(B), comply with the provisions of sections 23A 
                and 23B of the Federal Reserve Act in the same manner 
                and to the same extent as such transactions would be 
                required to comply with such sections if the bank were 
                a member bank.
            ``(3) Treatment as a wholesale financial institution.--Any 
        foreign bank which is, or is affiliated with a company which 
        is, treated as an investment bank holding company under this 
        subsection shall be treated as a wholesale financial 
        institution for purposes of clauses (iii) and (iv) of 
        subsection (a)(1)(B), subsection (a)(2)(B)(ii), and section 
        5(g), except that the Board may adopt such modifications, 
        conditions, or exemptions as the Board deems appropriate, 
        giving due regard to the principle of national treatment and 
        equality of competitive opportunity.
            ``(4) Nonapplicability of other exemption.--Any foreign 
        bank or company which is treated as an investment bank holding 
        company under this subsection shall not be eligible for any 
        exemption described in section 2(h).
    ``(c) Eligibility of Foreign Banks for Certain Treatment.--
            ``(1) Reciprocal national treatment.--
                    ``(A) In general.--A foreign bank that operates a 
                branch, agency or commercial lending company in the 
                United States, and any company that owns or controls 
                such a foreign bank, shall be eligible for the 
                treatment afforded under subsection (b) or section 
                11(n) only if the home country of such foreign bank or 
                company accords to United States banks the same 
                competitive opportunities in banking as such country 
                accords to domestic banks of such country.
                    ``(B) Coordination with nafta.--Subparagraph (A) 
                shall not apply in derogation of any obligation under 
                the North American Free Trade Agreement.
                    ``(C) Home country defined.--For purposes of 
                subparagraph (A), the term `home country' means, with 
                respect to any foreign bank or company referred to in 
                subparagraph (A), the country under the laws of which 
                the foreign bank or company is organized.
            ``(2) Prevention of evasion.--No foreign bank or bank owned 
        by a former United States national may operate a branch or 
        agency in the United States if the predominance of the assets 
        of such bank were acquired in connection with a merger with, or 
        purchase or assumption of all or substantially all the assets 
        of, a wholesale financial institution.
    ``(d) Rule for Financial Services Holding Companies.--For purposes 
of section 5(g)(2)(A)(ii), any foreign bank (as defined in section 1(b) 
of the International Banking Act of 1978) which is directly or 
indirectly owned, controlled, or operated by a company that--
            ``(1) as of January 1, 1995, was registered as a bank 
        holding company; or
            ``(2) is a successor to any such bank holding company,
shall be treated as a wholesale financial institution.''.
    (c) Conforming Amendments.--
            (1) Exception to deposit insurance requirement.--Section 
        3(e) of the Bank Holding Company Act of 1956 (12 U.S.C. 
        1842(e)) is amended by adding at the end the following: ``This 
        subsection shall not apply to a wholesale financial institution 
        that is controlled by an investment bank holding company that 
        controls no banks other than wholesale financial 
        institutions.''.
            (2) Appropriate federal banking agency.--Section 3(q)(2)(A) 
        of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)(2)(A)) 
        is amended to read as follows:
                    ``(A) any State member insured bank (except a 
                District bank) and wholesale financial institution as 
                authorized pursuant to section 9B of the Federal 
                Reserve Act;''.

SEC. 117. WHOLESALE FINANCIAL INSTITUTIONS.

    (a) In General.--The Federal Reserve Act (12 U.S.C. 221 et seq.) is 
amended by inserting after section 9A the following new section:

``SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

    ``(a) Application for Membership as Wholesale Financial 
Institution.--
            ``(1) Application required.--
                    ``(A) In general.--Any bank incorporated by special 
                law of any State, or organized under the general laws 
                of any State, may apply to the Board of Governors of 
                the Federal Reserve System to become a wholesale 
                financial institution and to subscribe to the stock of 
                the Federal reserve bank organized within the district 
                where the applying bank is located.
                    ``(B) Treatment as state member bank.--Any 
                application under subparagraph (A) shall be treated as 
                an application to become a State member bank under, and 
                shall be subject to the provisions of, section 9.
            ``(2) Insurance termination.--No bank that is insured under 
        the Federal Deposit Insurance Act may become a wholesale 
        financial institution unless it has met all requirements under 
        that Act for voluntary termination of deposit insurance.
    ``(b) General Requirements Applicable to Wholesale Financial 
Institutions.--
            ``(1) Federal reserve act.--Except as otherwise provided in 
        this section, wholesale financial institutions shall be member 
        banks and shall be subject to the provisions of this Act that 
        apply to member banks to the same extent and in the same manner 
        as State member insured banks, except that a wholesale 
        financial institution may terminate membership under this Act 
        only with the prior written approval of the Board and on terms 
        and conditions that the Board determines are appropriate to 
        carry out the purposes of this Act.
            ``(2) Prompt corrective action.--A wholesale financial 
        institution shall be deemed to be an insured depository 
        institution for purposes of section 38 of the Federal Deposit 
        Insurance Act except that--
                    ``(A) the relevant capital levels and capital 
                measures for each capital category shall be the levels 
                specified by the Board for wholesale financial 
                institutions in accordance with subsection (c);
                    ``(B) the provisions applicable to well capitalized 
                insured depository institutions shall be inapplicable 
                to wholesale financial institutions;
                    ``(C) the provisions authorizing or requiring an 
                institution to be placed into receivership shall not 
                apply to a wholesale financial institution, and, 
                instead, the Board is authorized or required, as the 
                case may be, to terminate the wholesale financial 
                institution's membership in the Federal Reserve System 
                or place the bank into conservatorship; and
                    ``(D) for purposes of applying the provisions of 
                section 38 of the Federal Deposit Insurance Act to 
                wholesale financial institutions, all references to the 
                appropriate Federal banking agency or to the 
                Corporation in that section shall be deemed to be 
                references to the Board.
            ``(3) Enforcement authority.--Subsections (j) and (k) of 
        section 7, subsections (b) through (n), (s), (u), and (v) of 
        section 8, and section 19 of the Federal Deposit Insurance Act 
        shall apply to a wholesale financial institution in the same 
        manner and to the same extent as such provisions apply to State 
        member insured banks and any reference in such sections to an 
        insured depository institution shall be deemed, for purposes of 
        this paragraph, to be a reference to a wholesale financial 
        institution.
            ``(4) Certain other statutes applicable.--A wholesale 
        financial institution shall be deemed to be a banking 
        institution, and the Board shall be the appropriate Federal 
        banking agency for such bank and all such bank's affiliates, 
        for purposes of the International Lending Supervision Act.
            ``(5) Bank merger act.--A wholesale financial institution 
        shall be subject to the provisions of sections 18(c) and 44 of 
        the Federal Deposit Insurance Act in the same manner and to the 
        same extent the wholesale financial institution would be 
        subject to such sections if the institution were a State member 
        insured bank.
    ``(c) Specific Requirements Applicable to Wholesale Financial 
Institutions.--
            ``(1) Limitations on deposits.--
                    ``(A) Minimum amount.--
                            ``(i) In general.--Pursuant to such 
                        regulations as the Board may prescribe, no 
                        wholesale financial institution may receive 
                        initial deposits of $100,000 or less, other 
                        than on an incidental and occasional basis.
                            ``(ii) Limitation on deposits of less than 
                        $100,000.--No bank may be treated as a 
                        wholesale financial institution if the total 
                        amount of the initial deposits of $100,000 or 
                        less at such bank constitute more than 5 
                        percent of the bank's total deposits.
                    ``(B) No deposit insurance.--No deposits held by a 
                wholesale financial institution shall be insured 
                deposits under the Federal Deposit Insurance Act.
                    ``(C) Advertising and disclosure.--The Board shall 
                prescribe regulations pertaining to advertising and 
                disclosure by wholesale financial institutions to 
                ensure that each depositor is notified that deposits at 
                the wholesale financial institution are not federally 
                insured or otherwise guaranteed by the United States 
                Government.
            ``(2) Special capital requirements applicable to wholesale 
        financial institutions.--
                    ``(A) Minimum capital levels.--
                            ``(i) In general.--The Board shall, by 
                        regulation, adopt capital requirements for 
                        wholesale financial institutions--
                                    ``(I) to account for the status of 
                                wholesale financial institutions as 
                                institutions that accept deposits that 
                                are not insured under the Federal 
                                Deposit Insurance Act; and
                                    ``(II) to provide for the safe and 
                                sound operation of the wholesale 
                                financial institution without undue 
                                risk to creditors or other persons, 
                                including Federal reserve banks, 
                                engaged in transactions with the bank.
                            ``(ii) Minimum leverage ratio.--The minimum 
                        leverage ratio of tier one capital to total 
                        assets of wholesale financial institutions 
                        shall be not less than the level required for a 
                        State member insured bank to be well 
                        capitalized unless the Board determines 
                        otherwise, consistent with safety and 
                        soundness.
                    ``(B) Capital categories for prompt corrective 
                action.--For purposes of applying section 38 of the 
                Federal Deposit Insurance Act with respect to any 
                wholesale financial institution, the Board shall, by 
                regulation, establish, for each relevant capital 
                measure specified by the Board under subparagraph (A), 
                the levels at which a wholesale financial institution 
                is well capitalized, adequately capitalized, 
                undercapitalized, significantly undercapitalized, and 
                critically undercapitalized.
            ``(3) Additional requirements applicable to wholesale 
        financial institutions.--In addition to any requirement 
        otherwise applicable to State member banks or applicable, under 
        this section, to wholesale financial institutions, the Board 
        may prescribe, by regulation or order, for wholesale financial 
        institutions--
                    ``(A) limitations on transactions with affiliates 
                to prevent an affiliate from gaining access to, or the 
                benefits of, credit from a Federal reserve bank, 
                including overdrafts at a Federal reserve bank;
                    ``(B) special clearing balance requirements; and
                    ``(C) any additional requirements that the Board 
                determines to be appropriate or necessary to--
                            ``(i) promote the safety and soundness of 
                        the wholesale financial institution, or
                            ``(ii) protect creditors and other persons, 
                        including Federal reserve banks, engaged in 
                        transactions with the wholesale financial 
                        institution.
            ``(4) Exemptions for wholesale financial institutions.--The 
        Board may, by regulation or order, exempt any wholesale 
        financial institution from any provision applicable to a State 
        member bank that is not a wholesale financial institution, if 
        the Board finds that such exemption is not inconsistent with--
                    ``(A) the promotion of the safety and soundness of 
                the wholesale financial institution; and
                    ``(B) the protection of creditors and other 
                persons, including Federal reserve banks, engaged in 
                transactions with the wholesale financial institution.
            ``(5) No effect on other provisions.--This section shall 
        not be construed as limiting the Board's authority over member 
        banks under any other provision of law, or to create any 
        obligation for any Federal reserve bank to make, increase, 
        renew, or extend any advances or discount under this Act to any 
        member bank or other depository institution.
    ``(d) Conservatorship Authority.--
            ``(1) In general.--The Board may appoint a conservator to 
        take possession and control of a wholesale financial 
        institution to the same extent and in the same manner as the 
        Comptroller of the Currency may appoint a conservator for a 
        national bank under section 203 of the Bank Conservation Act, 
        and the conservator shall exercise the same powers, functions, 
        and duties, subject to the same limitations, as are provided 
        under such Act for conservators of national banks.
            ``(2) Board authority.--The Board shall have the same 
        authority with respect to any conservator appointed under 
        paragraph (1) and the wholesale financial institution for which 
        such conservator has been appointed as the Comptroller of the 
        Currency has under the Bank Conservation Act with respect to a 
        conservator appointed under such Act and a national bank for 
        which the conservator has been appointed.
    ``(e) Definitions.--For purposes of this section, the following 
definitions shall apply:
            ``(1) Wholesale financial institution.--The term `wholesale 
        financial institution' means a bank whose application to become 
        a wholesale financial institution and a State member bank has 
        been approved by the Board under this section.
            ``(2) Deposit.--The term `deposit' has the meaning given to 
        such term by the Board under this Act.
            ``(3) State member insured bank.--The term `State member 
        insured bank' means a State member bank which is an insured 
        bank (as defined in section 3(h) of the Federal Deposit 
        Insurance Act).
    ``(f) Exclusive Jurisdiction.--Subsections (c) and (e) of section 
43 of the Federal Deposit Insurance Act shall not apply to any 
wholesale financial institution.''.
    (b) Voluntary Termination of Insured Status by Certain 
Institutions.--
            (1) Section 8 designations.--Section 8(a) of the Federal 
        Deposit Insurance Act (12 U.S.C. 1818(a)) is amended--
                    (A) by striking paragraph (1); and
                    (B) by redesignating paragraphs (2) through (9) as 
                paragraphs (1) through (8), respectively.
            (2) Voluntary termination of insured status.--The Federal 
        Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by 
        inserting after section 8 the following new section:
``SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS INSURED DEPOSITORY 
              INSTITUTION.

    ``(a) In General.--Except as provided in subsection (b), an insured 
State bank or a national bank may voluntarily terminate such bank's 
status as an insured depository institution in accordance with 
regulations of the Corporation if--
            ``(1) the bank provides written notice of the bank's intent 
        to terminate such insured status--
                    ``(A) to the Corporation and the Board of Governors 
                of the Federal Reserve System not less than 6 months 
                before the effective date of such termination; and
                    ``(B) to all depositors at such bank, not less than 
                6 months before the effective date of the termination 
                of such status; and
            ``(2) either--
                    ``(A) the deposit insurance fund of which such bank 
                is a member equals or exceeds the fund's designated 
                reserve ratio as of the date the bank provides a 
                written notice under paragraph (1) and the Corporation 
                determines that the fund will equal or exceed the 
                applicable designated reserve ratio for the 2 
                semiannual assessment periods immediately following 
                such date; or
                    ``(B) the Corporation and the Board of Governors of 
                the Federal Reserve System approve the termination of 
                the bank's insured status and the bank pays an exit fee 
                in accordance with subsection (e).
    ``(b) Exception.--Subsection (a) shall not apply with respect to--
            ``(1) an insured savings association;
            ``(2) an insured branch that is required to be insured 
        under subsection (a) or (b) of section 6 of the International 
        Banking Act of 1978; or
            ``(3) any institution described in section 2(c)(2) of the 
        Bank Holding Company Act of 1956.
    ``(c) Eligibility for Insurance Terminated.--Any bank that 
voluntarily elects to terminate the bank's insured status under 
subsection (a) shall not be eligible for insurance on any deposits or 
any assistance authorized under this Act after the period specified in 
subsection (f)(1).
    ``(d) Institution Must Become Wholesale Financial Institution or 
Terminate Deposit-Taking Activities.--Any depository institution which 
voluntarily terminates such institution's status as an insured 
depository institution under this section may not, upon termination of 
insurance, accept any deposits unless the institution is a wholesale 
financial institution under section 9B of the Federal Reserve Act.
    ``(e) Exit Fees.--
            ``(1) In general.--Any bank that voluntarily terminates 
        such bank's status as an insured depository institution under 
        this section shall pay an exit fee in an amount that the 
        Corporation determines is sufficient to account for the 
        institution's pro rata share of the amount (if any) which would 
        be required to restore the relevant deposit insurance fund to 
        the fund's designated reserve ratio as of the date the bank 
        provides a written notice under subsection (a)(1).
            ``(2) Procedures.--The Corporation shall prescribe, by 
        regulation, procedures for assessing any exit fee under this 
        subsection.
    ``(f) Temporary Insurance of Deposits Insured as of Termination.--
            ``(1) Transition period.--The insured deposits of each 
        depositor in a State bank or a national bank on the effective 
        date of the voluntary termination of the bank's insured status, 
        less all subsequent withdrawals from any deposits of such 
        depositor, shall continue to be insured for a period of not 
        less than 6 months and not more than 2 years, as determined by 
        the Corporation. During such period, no additions to any such 
        deposits, and no new deposits in the depository institution 
        made after the effective date of such termination shall be 
        insured by the Corporation.
            ``(2) Temporary assessments; obligations and duties.--
        During the period specified in paragraph (1) with respect to 
        any bank, the bank shall continue to pay assessments under 
        section 7 as if the bank were an insured depository 
        institution. The bank shall, in all other respects, be subject 
        to the authority of the Corporation and the duties and 
        obligations of an insured depository institution under this Act 
        during such period, and in the event that the bank is closed 
        due to an inability to meet the demands of the bank's 
        depositors during such period, the Corporation shall have the 
        same powers and rights with respect to such bank as in the case 
        of an insured depository institution.
    ``(g) Advertisements.--
            ``(1) In general.--A bank that voluntarily terminates the 
        bank's insured status under this section shall not advertise or 
        hold itself out as having insured deposits, except that the 
        bank may advertise the temporary insurance of deposits under 
        subsection (f) if, in connection with any such advertisement, 
        the advertisement also states with equal prominence that 
        additions to deposits and new deposits made after the effective 
        date of the termination are not insured.
            ``(2) Certificates of deposit, obligations, and 
        securities.--Any certificate of deposit or other obligation or 
        security issued by a State bank or a national bank after the 
        effective date of the voluntary termination of the bank's 
        insured status under this section shall be accompanied by a 
        conspicuous, prominently displayed notice that such certificate 
        of deposit or other obligation or security is not insured under 
        this Act.
    ``(h) Notice Requirements.--
            ``(1) Notice to the corporation.--The notice required under 
        subsection (a)(1)(A) shall be in such form as the Corporation 
        may require.
            ``(2) Notice to depositors.--The notice required under 
        subsection (a)(1)(B) shall be--
                    ``(A) sent to each depositor's last address of 
                record with the bank; and
                    ``(B) in such manner and form as the Corporation 
                finds to be necessary and appropriate for the 
                protection of depositors.''.
            (3) Definition.--Section 19(b)(1)(A)(i) of the Federal 
        Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is amended after ``such 
        Act'' by inserting ``, or any wholesale financial institution 
        as defined in section 9B of this Act''.
    (c) Reports on Discounts and Advances to Wholesale Financial 
Institutions.--Section 10B of the Federal Reserve Act (12 U.S.C. 
347(b)) is amended by adding at the end the following new subsection:
    ``(c) Reports on Discounts and Advances to Wholesale Financial 
Institutions.--
            ``(1) In general.--The Board shall submit a report to the 
        Congress at the end of any year in which any wholesale 
        financial institution has obtained a discount, advance, or 
        other extension of credit from a Federal reserve bank.
            ``(2) Contents.--Any report submitted under paragraph (1) 
        shall explain the circumstances and need for any discount, 
        advance, or other extension of credit to a wholesale financial 
        institution during the period covered by the report, including 
        the type and amount of credit extended and the amount of credit 
        remaining outstanding as of the date of the report.''.

                    Subtitle C--Financial Activities

SEC. 121. FINANCIAL ACTIVITIES.

    Section 4(c)(8) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(c)(8)) is amended--
            (1) by striking ``shares of any company'' and all that 
        follows through ``for a bank holding company to provide'' and 
        inserting ``shares of any company the activities of which the 
        Board after due notice has determined (by order, regulation, or 
        advisory opinion) to be financial in nature or incidental to 
        such financial activities. In determining whether an activity 
        is financial in nature or incidental to financial activities, 
        the Board shall take into account changes or reasonably 
        expected changes in the marketplace in which financial services 
        holding companies compete as well as changes or reasonably 
        expected changes in the technology by which these services are 
        delivered. In addition, the Board shall take into account 
        activities considered financial activities or banking or 
        financial operations for purposes of the regulation of the 
        Board designated as `Regulation K' (12 C.F.R. 211.23 
        (f)(5)(iii)(B)) as in effect on the date of the enactment of 
        the Financial Services Competitiveness Act of 1995. Any 
        activity that the Board has determined, by order or regulation 
        that is in effect on such date to be so closely related to 
        banking or managing or controlling banks as to be a proper 
        incident thereto shall be deemed to be of a financial nature 
        for purposes of this paragraph without further action by the 
        Board (subject to the same terms and conditions contained in 
        such order or regulation, unless modified by the Board), but 
        for purposes of this subsection it shall not be closely related 
        to banking or managing or controlling banks or financial in 
        nature or incidental to a financial activity for a financial 
        services holding company to provide'';
            (2) in the 3d sentence, by inserting ``and between 
        activities commenced by affiliates of different classes of 
        banks'' before the period at the end; and
            (3) by striking the 2d sentence.

SEC. 122. NO PRIOR APPROVAL REQUIRED FOR WELL CAPITALIZED AND WELL 
              MANAGED FINANCIAL SERVICES HOLDING COMPANIES.

    Section 4(j) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(j)) is amended--
            (1) in paragraph (1), by striking ``No'' and inserting 
        ``Except as provided in paragraph (3) or section 10(b)(3), 
        no''; and
            (2) by adding at the end the following new paragraphs:
            ``(3) No notice required for certain transactions.--
        Notwithstanding paragraph (1), no notice under subsection 
        (c)(8) or (a)(2)(B) is required for a proposal by a financial 
        services holding company to engage in any activity (other than 
        an activity described in subparagraph (A) or (B) of section 
        10(a)(1)) or acquire or retain the shares or assets of any 
        company (other than a securities affiliate) if the proposal 
        qualifies under paragraph (4).
            ``(4) Criteria for statutory approval.--A proposal 
        qualifies under this paragraph if all of the following criteria 
        are met:
                    ``(A) Financial criteria.--Both before and 
                immediately after the proposed transaction--
                            ``(i) the acquiring financial services 
                        holding company is well capitalized;
                            ``(ii) the lead depository institution of 
                        such holding company is well capitalized;
                            ``(iii) well capitalized depository 
                        institutions control at least 80 percent of the 
                        aggregate total risk-weighted assets of 
                        depository institutions controlled by such 
                        holding company; and
                            ``(iv) no depository institution controlled 
                        by such holding company is undercapitalized.
                    ``(B) Managerial criteria.--
                            ``(i) Well managed.--At the time of the 
                        transaction, the acquiring financial services 
                        holding company, the lead depository 
                        institution of such holding company, and 
                        depository institutions that control at least 
                        80 percent of the aggregate total risk-weighted 
                        assets of depository institutions controlled by 
                        such holding company are well managed.
                            ``(ii) Limitation on poorly managed 
                        institutions.--No depository institution which 
                        is controlled by the acquiring financial 
                        services holding company has received any of 
                        the lowest 2 composite ratings at the later of 
                        the institution's most recent examination or 
                        subsequent review.
                            ``(iii) Recently acquired institutions.--
                        Depository institutions acquired by the 
                        financial services holding company during the 
                        12-month period ending on the date of the 
                        proposed transaction may be excluded for 
                        purposes of clause (ii) if--
                                    ``(I) the financial services 
                                holding company has developed a plan 
                                acceptable to the appropriate Federal 
                                banking agency for the institution to 
                                restore the capital and management of 
                                the institution; and
                                    ``(II) all such depository 
                                institutions represent, in the 
                                aggregate, less than 25 percent of the 
                                total risk-weighted assets of all 
                                depository institutions controlled by 
                                the financial services holding company.
                    ``(C) Activities permissible.--Following 
                consummation of the proposed transaction, the financial 
                services holding company engages directly or through a 
                subsidiary solely in--
                            ``(i) activities that are permissible under 
                        subsection (c)(8), as determined by the Board 
                        by any regulation, order, or advisory opinion 
                        under such subsection that is in effect at the 
                        time of the proposed transaction, subject to 
                        all of the restrictions, terms, and conditions 
                        of such subsection and such regulation, order, 
                        or advisory opinion; and
                            ``(ii) such other activities as are 
                        otherwise permissible under this Act, subject 
                        to the restrictions, terms and conditions, 
                        including any prior notice or approval 
                        requirements, provided in this Act.
                    ``(D) Size of acquisition.--
                            ``(i) Asset size.--The book value of the 
                        total risk-weighted assets acquired does not 
                        exceed 10 percent of the consolidated total 
                        risk-weighted assets of the acquiring financial 
                        services holding company.
                            ``(ii) Consideration.--The gross 
                        consideration to be paid for the securities or 
                        assets does not exceed 15 percent of the 
                        consolidated tier 1 capital of the acquiring 
                        financial services holding company.
                    ``(E) Notice not otherwise warranted.--For 
                proposals described in paragraph (5)(B), the Board has 
                not, before the conclusion of the period described in 
                such paragraph, advised the financial services holding 
                company that a notice under paragraph (1) is required.
            ``(5) Notification.--
                    ``(A) Commencement of activities approved by 
                rule.--A financial services holding company that 
                qualifies under paragraph (4) and proposes to engage de 
                novo, directly or through a subsidiary, in any activity 
                that is permissible
                 under subsection (c)(8), as determined by the Board by 
regulation, may commence that activity without prior notice to the 
Board.
                    ``(B) Subsequent notice.--A financial services 
                holding company that commences an activity under 
                subsection (c)(8) without prior notice to the Board 
                shall provide written notice to the Board no later than 
                10 business days after commencing the activity.
                    ``(C) Activities permitted by order and 
                acquisitions.--
                            ``(i) In general.--At least 12 business 
                        days prior to commencing any activity (other 
                        than an activity described in subparagraph (A)) 
                        or acquiring shares or assets of any company in 
                        a proposal that qualifies under paragraph (4), 
                        the financial services holding company shall 
                        provide written notice to the Board of the 
                        proposal, unless the Board determines that no 
                        notice or a shorter notice period is 
                        appropriate.
                            ``(ii) Description of proposed 
                        activities.--A notice under clause (i) shall 
                        include a description of the proposed 
                        activities and the terms of any proposed 
                        acquisition.
            ``(6) Adjustment of amounts.--The Board may, by regulation, 
        adjust the amounts and the manner in which the percentage of 
        depository institutions is calculated under subparagraph 
        (B)(i), (B)(iii)(II), or (D) of paragraph (4) if the Board 
        determines that any such adjustment is consistent with safety 
        and soundness and the purposes of this Act.
            ``(7) Expedited procedure for new activities.--
                    ``(A) Expedited preacquisition review.--After the 
                end of the 12-day period referred to in paragraph 
                (5)(C) and subject to any final ruling under 
                subparagraph (B), a financial services holding company 
                may acquire a company engaged in activities that the 
                company believes are financial in nature for purposes 
                of subsection (c)(8) and that the Board has not 
                previously reviewed under such subsection if--
                            ``(i) the proposal qualifies under all of 
                        the criteria in paragraph (4) other than 
                        paragraph (4)(C);
                            ``(ii) the financial services holding 
                        company provides the notice required under 
                        paragraph (5)(C), and includes with such notice 
                        an explanation of the facts and circumstances 
                        that provide a reasonable basis for concluding 
                        that the proposed activities are financial in 
                        nature or incidental to such financial 
                        activities; and
                            ``(iii) before the end of such 12-day 
                        period, the Board has not--
                                    ``(I) required a notice under 
                                paragraph (1) with respect to the 
                                proposed transaction; or
                                    ``(II) advised the financial 
                                services holding company that the 
                                company has failed to provide a 
                                reasonable basis for concluding that 
                                the proposed activities are financial 
                                in nature or incidental to such 
                                financial activities.
                    ``(B) Postacquisition review.--
                            ``(i) Notice procedure.--A financial 
                        services holding company which is permitted to 
                        make an acquisition under this paragraph shall 
                        file a notice with the Board in accordance with 
                        paragraph (1) before the end of the 30-day 
                        period beginning on the date of the 
                        consummation of the acquisition.
                            ``(ii) Limited review.--The Board's review 
                        of a postconsummation notice required under 
                        this subparagraph shall be limited to 
                        determining whether the proposed activities are 
                        permissible under subsection (c)(8), including 
                        whether the proposal meets the criteria in 
                        paragraph (2)(A).
                            ``(iii) Conditional action.--No provision 
                        of this paragraph shall be construed as 
                        limiting in any way the authority of the Board 
                        under this section to impose conditions on the 
                        conduct of any activity or the ownership of any 
                        company.
                            ``(iv) Divestiture of impermissible 
                        activities.--If the Board determines that any 
                        proposed activity is not permissible under 
                        subsection (c)(8), the financial services 
                        holding company shall terminate the activity or 
                        divest the company acquired in reliance on this 
                        paragraph before the end of the 2-year period 
                        beginning on the date of such determination.
                    ``(C) Initial decision not prejudicial to 
                subsequent determination.--A decision by the Board 
                under subparagraph (A) not to require a notice under 
                paragraph (1) during the 12-day period referred to in 
                such subparagraph shall not prejudice the Board's 
                decision under subparagraph (B).''.

SEC. 123. STREAMLINED EXAMINATION AND REPORTING REQUIREMENTS FOR ALL 
              FINANCIAL SERVICES HOLDING COMPANIES.

    Section 5(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1844(c)) is amended to read as follows--
    ``(c) Reports and Examinations.--
            ``(1) Purposes.--
                    ``(A) In general.--The purpose of this subsection 
                is to authorize the Board, through reports and 
                examinations, to gather information from a financial 
                services holding company and the subsidiaries of any 
                such holding company regarding the structure, 
                activities, and financial condition of the financial 
                services holding company and such subsidiaries so that 
                the Board can monitor risks within the holding company 
                system that could adversely affect any depository 
                institution subsidiary of the holding company and may 
                monitor and enforce compliance with this Act.
                    ``(B) Purpose not to impose additional burdens on 
                holding companies.--It is the intended purpose of this 
                subsection that the Board shall--
                            ``(i) exercise the Board's authority to 
                        collect information under this section in a 
                        manner that is the least burdensome to 
                        financial services holding companies and the 
                        subsidiaries of such companies; and
                            ``(ii) rely, to the fullest extent 
                        possible, on reports prepared for and 
                        examinations conducted by or for other Federal 
                        and State supervisors.
                    ``(C) Purpose to require carefully tailored 
                examinations.--It is the intended purpose of this 
                subsection that the Board shall tailor the focus and 
                scope of any examination under this section to a 
                financial services holding company or to any subsidiary 
                of such company which, because of financial conditions, 
                activities, operations of such subsidiary, the 
                transactions between such subsidiary and other 
                affiliates, or the size of any such subsidiary poses a 
                potential material risk to a depository institution 
                subsidiary of such holding company.
            ``(2) Reports.--
                    ``(A) In general.--The Board from time to time may 
                require any financial services holding company and any 
                subsidiary of such company to submit reports under oath 
                to keep the Board informed as to--
                            ``(i) the company's or the subsidiary's 
                        activities, financial condition, policies, 
                        systems for monitoring and controlling 
                        financial and operational risks, and 
                        transactions with depository institution 
                        subsidiaries of the holding company; and
                            ``(ii) the extent to which the company or 
                        subsidiary has complied with the provisions of 
                        this Act and regulations prescribed and orders 
                        issued under this Act.
                    ``(B) Use of existing reports.--
                            ``(i) In general.--The Board shall, to the 
                        fullest extent possible, accept reports in 
                        fulfillment of the Board's reporting 
                        requirements under this paragraph that a 
                        financial services holding company or any 
                        subsidiary of such company has been required to 
                        provide to other Federal and State supervisors 
                        or to appropriate self-regulatory 
                        organizations.
                            ``(ii) Availability.--A financial services 
                        holding company or a subsidiary of such company 
                        shall provide to the Board, at the request of 
                        the Board, a report referred to in clause (i).
            ``(3) Examinations.--
                    ``(A) Limited use of examination authority.--The 
                Board may make examinations of each financial services 
                holding company and each subsidiary of such company in 
                order to--
                            ``(i) inform the Board of the nature of the 
                        operations and financial condition of the 
                        financial services holding company and such 
                        subsidiaries;
                            ``(ii) inform the Board of the--
                                    ``(I) financial and operational 
                                risks within the financial services 
                                holding company system that may affect 
                                any depository institution owned by 
                                such holding company; and
                                    ``(II) the systems of the holding 
                                company and such subsidiaries for 
                                monitoring and controlling those risks; 
                                and
                            ``(iii) monitor compliance with the 
                        provisions of this Act and those governing 
                        transactions and relationships between any 
                        depository institution controlled by a 
                        financial services holding company and any of 
                        the company's other subsidiaries.
                    ``(B) Restricted focus of examinations.--The Board 
                shall, to the fullest extent possible, limit the focus 
                and scope of any examination of a financial services 
                holding company to--
                            ``(i) the holding company; and
                            ``(ii) to any subsidiary (other than a 
                        depository institution subsidiary) of the 
                        holding company which, because of the size, 
                        condition, or activities of the subsidiary, the 
                        nature or size of transactions between such 
                        subsidiary and any depository institution 
                        affiliate, or the centralization of functions 
                        within the holding company system, could have a 
                        materially adverse effect on the safety and 
                        soundness of any depository institution 
                        affiliate of the subsidiary or of the holding 
                        company.
                    ``(C) Deference to bank examinations.--The Board 
                shall, to the fullest extent possible, use the report 
                of examinations of depository institutions made by the 
                Comptroller of the Currency, the Federal Deposit 
                Insurance Corporation, the Office of Thrift Supervision 
                or the appropriate State depository institution 
                supervisory authority for the purposes of this section.
                    ``(D) Deference to other examinations.--The Board 
                shall, to the fullest extent possible, use the reports 
                of examination made of--
                            ``(i) any registered broker or dealer by or 
                        on behalf of the Securities Exchange 
                        Commission, and
                            ``(ii) any other subsidiary that the Board 
                        finds to be comprehensively supervised under 
                        relevant Federal or State law by a Federal or 
                        state agency or authority.
                    ``(E) Confidentiality of reported information.--
                            ``(i) In general.--Notwithstanding any 
                        other provision of law, the Board shall
                        not be compelled to disclose any information 
                        required to be reported under this paragraph, 
                        or any information supplied to the Board by any 
                        domestic or foreign regulatory agency, that 
                        relates to the financial or operational 
                        condition of any financial services holding 
                        company or any subsidiary of such company.
                            ``(ii) Compliance with requests for 
                        information.--No provision of this subparagraph 
                        shall be construed as authorizing the Board to 
                        withhold information from Congress, or 
                        preventing the Board from complying with a 
                        request for information from any other Federal 
                        department or agency for purposes within the 
                        scope of such department's or agency's 
                        jurisdiction, or from complying with an order 
                        of a court of competent jurisdiction in an 
                        action brought by the United States or the 
                        Board.
                            ``(iii) Coordination with other law.--For 
                        purposes of section 552 of title 5, United 
                        States Code, this subparagraph shall be 
                        considered to be a statute described in 
                        subsection (b)(3)(B) of such section.
                            ``(iv) Designation of confidential 
                        information.--In prescribing regulations to 
                        carry out the requirements of this subsection, 
                        the Board shall designate information described 
                        in or obtained pursuant to this paragraph as 
                        confidential information.
                    ``(F) Costs.--The cost of any examination conducted 
                by the Board under this section may be assessed 
                against, and made payable by, such holding company.''.

SEC. 124. HOLDING COMPANY SUPERVISION FOR FINANCIAL SERVICES HOLDING 
              COMPANIES ENGAGED PRIMARILY IN NONBANKING ACTIVITIES.

    Section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844) 
is amended by adding at the end the following new subsection:
    ``(g) Reduced Supervision of Companies Controlling Principally 
Nondepository Institutions.--
            ``(1) Election.--
                    ``(A) In general.--Any financial services holding 
                company that qualifies under paragraph (2) may make an 
                election to be governed by the approval, capital, 
                reporting and examination requirements of paragraphs 
                (3), (4), (5) and (6) by--
                            ``(i) filing a written notice of such 
                        election with the Board; and
                            ``(ii) if applicable, providing a written 
                        guarantee to the Federal Deposit Insurance 
                        Corporation pursuant to paragraph (2).
                    ``(B) Effective period of election.--An election 
                under subparagraph (A) shall remain in effect--
                            ``(i) so long as the financial services 
                        holding company continues to qualify under 
                        paragraph (2); or
                            ``(ii) until the financial services holding 
                        company revokes the election.
            ``(2) Criteria for election.--A financial services holding 
        company may make an election under paragraph (1) if the company 
        meets all of the following criteria:
                    ``(A) Company principally controls nondepository 
                companies.--
                            ``(i) Financial services holding companies 
                        with depository institutions.--In the case of a 
                        financial services holding company (other than 
                        an investment bank holding company), the 
                        consolidated total risk-weighted assets of all 
                        depository institutions and foreign banks (as 
                        defined in section 1(b)(7) of the International 
                        Banking Act of 1978) controlled by the 
                        financial services holding company--
                                    ``(I) constitute less than 10 
                                percent of the consolidated total risk-
                                weighted assets of such company; and
                                    ``(II) are less than 
                                $5,000,000,000.
                            ``(ii) Investment bank holding companies.--
                        In the case of an investment bank holding 
                        company, the consolidated total risk-weighted 
                        assets of all wholesale financial institutions 
                        controlled by the investment bank holding 
                        company--
                                    ``(I) constitute less than 25 
                                percent of the consolidated total risk-
                                weighted assets of such company; and
                                    ``(II) are less than 
                                $15,000,000,000.
                            ``(iii) Inflation adjustment.--The dollar 
                        limitation contained in clauses (i)(II) and 
                        (ii)(II) shall be adjusted annually after 
                        December 31, 1995, by the annual
                         percentage increase in the Consumer Price 
Index for Urban Wage Earners and Clerical Workers published by the 
Bureau of Labor Statistics.
                            ``(iv) Authority to increase limits.--The 
                        Board may increase any of the percentages 
                        referred to in clauses (i)(I) and (ii)(I) and 
                        the dollar amounts described in clauses (i)(II) 
                        and (ii)(II) as the Board may determine to be 
                        appropriate.
                    ``(B) Well capitalized institutions.--Each 
                depository institution controlled by the financial 
                services holding company is well capitalized.
                    ``(C) Well managed institutions.--
                            ``(i) In general.--Each depository 
                        institution controlled by the financial 
                        services holding company received a CAMEL 
                        composite rating of 1 or 2 (or an equivalent 
                        rating under an equivalent rating system) in 
                        the most recent examination of such 
                        institution.
                            ``(ii) Exclusion for newly acquired 
                        institutions.--A depository institution 
                        acquired by a financial services holding 
                        company during the 12-month period ending on 
                        the date of the election by such company under 
                        paragraph (1) may be excluded for purposes of 
                        clause (i) if the financial services holding 
                        company has developed a plan acceptable to the 
                        appropriate Federal banking agency (for such 
                        institution) to restore the capital and 
                        management of the institution.
                    ``(D) Holding company guarantee.--
                            ``(i) In general.--The financial services 
                        holding company provides a written guarantee 
                        acceptable to the Federal Deposit Insurance 
                        Corporation to maintain the capital levels of 
                        each insured depository institution controlled 
                        by the financial services holding company at 
                        not less than the levels required for such 
                        institution to remain well capitalized.
                            ``(ii) Limitation on liability.--The 
                        liability of a financial services holding 
                        company under a guarantee provided under this 
                        subparagraph shall not exceed an amount equal 
                        to 10 percent of the total risk-weighted assets 
                        of the insured depository institution, measured 
                        as of the date that the institution becomes 
                        undercapitalized.
                            ``(iii) Duration of guarantee.--
                        Notwithstanding paragraph (1), a financial 
                        services holding company that has elected 
                        treatment under this subsection shall continue 
                        to be bound by the guarantee made under this 
                        subsection until released in accordance with 
                        this subparagraph.
                            ``(iv) Release from liability.--The Board 
                        shall release a financial services holding 
                        company from the guarantee applicable with 
                        respect to any depository institution 
                        subsidiary of such company--
                                    ``(I) upon the written request of 
                                the financial services holding company 
                                to revoke the company's election under 
                                paragraph (1) if the Board determines 
                                that each depository institution 
                                controlled by the financial services 
                                holding company is well capitalized and 
                                well managed at the time of such 
                                revocation;
                                    ``(II) in the case of a financial 
                                services holding company which no 
                                longer meets the requirements of 
                                subparagraph (A), upon a determination 
                                by the Board that each depository 
                                institution controlled by the financial 
                                services holding company is well 
                                capitalized and well managed;
                                    ``(III) upon the written request of 
                                the financial services holding company 
                                following the divestiture of control of 
                                the depository institution in a 
                                transaction that does not require 
                                Federal assistance if the Board 
                                determines that, immediately following 
                                the divestiture, the depository 
                                institution is or will be well 
                                capitalized; or
                                    ``(IV) upon a determination by the 
                                Board, after consultation with the 
                                Federal Deposit Insurance Corporation, 
                                that, subject to the limit on liability 
                                provided in clause (ii), the financial 
                                services holding company has fully 
                                performed under the guarantee.
                    ``(E) Responsiveness to community needs.--The lead 
                insured depository institution subsidiary of the 
                financial services holding company and insured 
                depository institutions controlling at least 80 percent 
                of the aggregate total risk-weighted assets of insured 
                depository institutions controlled by the financial 
                services holding company have achieved a `satisfactory 
                record of meeting community credit needs', or better, 
                during the most recent examination of such insured 
                depository institutions.
            ``(3) No notice or approval required for certain purposes 
        under paragraphs (8), (13), or (15) of section 4(c).--
                    ``(A) In general.--Notwithstanding paragraphs (8), 
                (13), and, in the case of an investment bank holding 
                company, (15) of section 4(c), a financial services 
                holding company that has in effect an election under 
                paragraph (1), and any subsidiary of such holding 
                company, may, without prior notice to, or the approval 
                of, the Board under paragraph (8), (13), or, in the 
                case of an investment bank holding company, (15) of 
                section 4(c), engage de novo in any activity, or 
                acquire shares of any company engaged in any activity, 
                if--
                            ``(i) the Board has determined, by order or 
                        regulation in effect at the time the
                         company or subsidiary commences to engage in 
such activity or acquire such shares, that the activity is permissible 
for a financial services holding company or a subsidiary of such 
company to engage in under paragraph (8) or (13) of section 4(c) (and 
regulations prescribed under such paragraphs); and
                            ``(ii) the activity is conducted in 
                        compliance with all conditions and limitations 
                        applicable to such activity under any 
                        regulation, order, or advisory opinion 
                        prescribed or issued by the Board.
                    ``(B) Subsequent notice.--A financial services 
                holding company that commences to engage in an 
                activity, or makes an acquisition, in accordance with 
                subparagraph (A) shall inform the Board of such fact, 
                in writing, not later than 10 days after commencing the 
                activity or consummating the acquisition.
            ``(4) Capital.--
                    ``(A) In general.--The Board shall not (by 
                regulation or order), directly or indirectly, establish 
                or apply minimum capital requirements to a financial 
                services holding company which has in effect an 
                election under paragraph (1) unless the Board 
                concludes, on the basis of all information available to 
                the Board, that the financial services holding company 
                is not maintaining sufficient financial resources to 
                meet fully any guarantee required under paragraph (2).
                    ``(B) Criteria for consideration.--For purposes of 
                making a determination under subparagraph (A), the 
                Board shall consider, in addition to any other relevant 
                considerations, the financial condition and the 
                adequacy of the capital of each of the depository 
                institutions controlled by the financial services 
                holding company.
            ``(5) Reports.--
                    ``(A) In general.--The reporting requirements 
                contained in subsection (c)(2) shall apply to a 
                financial services holding company which qualifies 
                under this subsection, to the extent provided by the 
                Board.
                    ``(B) Exemptions from reporting requirements.--
                            ``(i) In general.--The Board may, by 
                        regulation or order, exempt any company or 
                        class of companies, under such terms and 
                        conditions and for such periods as the Board 
                        shall provide in such regulation or order, from 
                        the provisions of this paragraph and any 
                        regulations prescribed under this paragraph.
                            ``(ii) Criteria for consideration.--In 
                        granting any exemption under clause (i), the 
                        Board shall consider, among other factors--
                                    ``(I) whether information of the 
                                type required under this paragraph is 
                                available from a supervisory agency (as 
                                defined in section 1101(7) of the Right 
                                to Financial Privacy Act of 1978), the 
                                Commodity Futures Trading Commission, 
                                or a foreign regulatory body of a 
                                similar type;
                                    ``(II) the primary business of the 
                                company; and
                                    ``(III) the nature and extent of 
                                domestic or foreign regulations of the 
                                company's activities.
            ``(6) Examinations.--
                    ``(A) Limited use of examination authority for 
                financial services holding companies.--The Board shall 
                not examine, under this section, any financial services 
                holding company described in paragraph (2)(A)(i) for 
                which an election is in effect under paragraph (1) or 
                any subsidiary (other than a depository institution) of 
                such holding company unless--
                            ``(i) the Board determines, on the basis of 
                        all information available to the Board, that--
                                    ``(I) the operations or activities 
                                of the financial services holding 
                                company or any subsidiary of such 
                                company, or any transaction involving 
                                such company or subsidiary and an 
                                affiliated depository institution, may 
                                pose a material risk to the safety and 
                                soundness of any depository institution 
                                owned by such holding company; or
                                    ``(II) the financial services 
                                holding company does not appear to have 
                                sufficient resources to meet the 
                                guarantee required under paragraph (2); 
                                or
                            ``(ii) the Board is unable to accomplish 
                        the purposes described in subsection (c)(3)(A) 
                        without such examinations.
                    ``(B) Limited use of examination authority for 
                investment bank holding companies.--The Board shall not 
                examine, under this section, any investment bank 
                holding company described in paragraph (2)(A)(ii) which 
                has an election in effect under paragraph (1) or any 
                subsidiary (other than a depository institution) of 
                such holding company unless--
                            ``(i) the Board determines that the 
                        operations or activities of the investment bank 
                        holding company or any subsidiary of such 
                        company, or any transaction involving such 
                        company or subsidiary and an affiliated 
                        depository institution, may pose a material 
                        risk to the safety and soundness of any 
                        depository institution owned by such holding 
                        company; or
                            ``(ii) the Board is unable to determine 
                        from reports the nature of the operations, 
                        financial condition, activities, or 
                        effectiveness of the risk management systems of 
                        the investment bank holding company or any 
                        subsidiary of such company, or to assess 
                        compliance with the provisions of this Act and 
                        those governing transactions and relationships 
                        between any depository institution controlled 
                        by the investment bank holding company and the 
                        investment bank holding company or any of such 
                        subsidiaries.
                    ``(C) Restricted focus and deference in 
                examinations.--The Board shall limit the focus and 
                scope of any examination, under this section, of a 
                financial services holding company or investment bank 
                holding company for which an election is in effect 
                under paragraph (1) or of any subsidiary (other than a 
                depository institution) of such holding company and 
                shall defer to examinations conducted by the Securities 
                Exchange Commission or other supervisors in accordance 
                with subparagraphs (B), (C), and (D) of subsection 
                (c)(3).''.

SEC. 125. CONVERSION OF UNITARY SAVINGS AND LOAN HOLDING COMPANIES TO 
              FINANCIAL SERVICES HOLDING COMPANIES.

    The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
amended by inserting after section 5 the following new section:
``SEC. 6. CONVERSION OF UNITARY SAVINGS AND LOAN HOLDING COMPANIES TO 
              FINANCIAL SERVICES HOLDING COMPANIES.

    ``(a) Streamlined Procedure for Conversion.--
            ``(1) In general.--During the 18-month period beginning on 
        the date of the enactment of the Financial Services 
        Competitiveness Act of 1995, no approval shall be required 
        under section 3(a) or paragraph (8) or (13) of section 4(c) for 
        any qualified savings and loan holding company to become a 
        financial services holding company for any company that, both 
        prior to January 1, 1995, and on the date of enactment of the 
        Financial Services Competitiveness Act of 1995, is a savings 
        and loan holding company if the requirements of paragraph (2) 
        are met.
            ``(2) Eligibility requirements.--A qualified savings and 
        loan holding company shall be eligible to become a financial 
        services holding company pursuant to paragraph (1) if--
                    ``(A) the company becomes a financial services 
                holding company as the result of the conversion of a 
                savings association controlled by such company as of 
                the date of enactment of the Financial Services 
                Competitiveness Act of 1995 into a bank;
                    ``(B) the company is adequately capitalized before 
                and immediately after the conversion referred to in 
                subparagraph (A);
                    ``(C) all depository institutions controlled by 
                such company are well capitalized before and 
                immediately after such conversion;
                    ``(D) all depository institutions controlled by 
                such company are well managed before the conversion;
                    ``(E) the Board would not be prohibited under any 
                provision of section 3(d) from approving the 
                transaction;
                    ``(F) the activities of the company and of each 
                subsidiary of the company comply with this Act (and 
                regulations prescribed under this Act); and
                    ``(G) the company provides the Board with at least 
                30 days written notice of the proposed conversion, and, 
                before the expiration of such 30-day period, the Board 
                has not objected to the company becoming a financial 
                services holding company based on the criteria 
                contained in this subsection.
            ``(3) Qualified savings and loan holding company defined.--
        For purposes of this subsection, the term `qualified savings 
        and loan holding company' means any company which became a 
        savings and loan holding company before January 1, 1995, and is 
        a savings and loan holding company as of the date of the 
        enactment of the Financial Services Competitiveness Act of 
        1995.
    ``(b) Limited Retention of Existing Investments.--Any holding 
company which converts to a financial services holding company in 
accordance with subsection (a) may retain direct or indirect ownership 
or control of voting shares of any company as provided in, and subject 
to, section 4(k) if--
            ``(1) the holding company controlled 1 or more savings 
        associations in accordance with section 10(c)(3) of the Home 
        Owners Loan Act before January 1, 1995, and as of the date of 
        the enactment of the Financial Services Competitiveness Act of 
        1995;
            ``(2) the investment in voting shares and the financial 
        services holding company meet the requirements of section 4(k) 
        (other than paragraph (1)(A)(iii) of such section); and
            ``(3) more than 75 percent of the revenues of the financial 
        services holding company for each of the 2 calendar years 
        before the date such company became a financial services 
        holding company involved securities activities described in 
        subparagraphs (A) and (B) of section 10(a)(1) and activities 
        that the Board has determined to be permissible under section 
        4(c)(8).''.
SEC. 126. FINANCIAL SERVICES ADVISORY COMMITTEE.

    (a) Establishment.--There is hereby established the Financial 
Services Advisory Committee (hereinafter in this section referred to as 
the ``Committee'').
    (b) Membership.--
            (1) In general.--The Committee shall consist of 9 members, 
        appointed as follows from among individuals who are not 
        officers or employees of the Federal Government and who are 
        especially qualified to serve on such committee by virtue of 
        their education, training, or experience:
                    (A) 1 member appointed by the Secretary of the 
                Treasury.
                    (B) 2 members appointed by the Comptroller of the 
                Currency.
                    (C) 2 members appointed by the Director of the 
                Office of Thrift Supervision.
                    (D) 2 members appointed by the Board of Governors 
                of the Federal Reserve System.
                    (E) 2 members appointed by the Board of Directors 
                of the Federal Deposit Insurance Corporation.
            (2) Representation of small and independent depository 
        institutions.--Of the members appointed under subparagraphs 
        (B), (C), (D), and (E) of paragraph (1), 1 of the 2 members 
        appointed under each such paragraph shall be appointed from 
        among individuals who are especially qualified to represent the 
        interests of depository institutions which--
                    (A) have total assets of less than $500,000,000; or
                    (B) are not controlled by any depository 
                institution holding company.
    (c) Vacancies.--Any vacancy on the Committee shall be filled in the 
same manner in which the original appointment was made.
    (d) Pay and Expenses.--Members of the Committee shall serve without 
pay, but each member shall be reimbursed for expenses incurred in 
connection with attendance of such members at meetings of the Committee 
by the agency which appointed such member to the Committee.
    (e) Terms.--Members shall be appointed for terms of 1 year.
    (f) Authority of the Committee.--The Committee may select a 
chairperson, vice chairperson, and secretary, and adopt methods of 
procedure, and shall have power--
            (1) to confer with each Federal banking agency on general 
        and special business conditions and regulatory and other 
        matters relating to the financial services industry in the 
        United States and the impact of this Act, and the amendments 
        made by this Act, on the financial service industry, especially 
        with regard to depository institutions described in subsection 
        (b)(2); and
            (2) to request information from, and to make 
        recommendations to, each of the Federal banking agencies with 
        respect to matters within the jurisdiction of such agency.
    (g) Meetings.--The Committee shall meet at least 2 times each year 
at the call of the chairperson or a majority of the members.
    (h) Reports.--The Committee shall submit a semiannual written 
report to the Committee on Banking and Financial Services of the House 
and to the Committee on Banking, Housing, and Urban Affairs of the 
Senate. Such report shall describe the activities of the Committee for 
such semiannual period and contain such recommendations as the 
Committee considers appropriate.
    (i) Provision of Staff and Other Resources.--Each of the Federal 
banking agencies shall provide the Committee with the use of such 
resources, including staff, as the
 Committee reasonably shall require to carry out its duties, including 
the preparation and submission of reports to Congress, under this 
section.
    (j) Definitions.--The terms ``insured depository institution'' and 
``Federal banking agencies'' have the meaning given to such terms in 
section 3 of the Federal Deposit Insurance Act.
    (k) Federal Advisory Committee Act Does Not Apply.--The Federal 
Advisory Committee Act shall not apply to the Committee.
    (l) Sunset.--The Committee shall cease to exist 10 years after the 
enactment of this section.
SEC. 127. COORDINATION WITH STATE LAW.

    Except as specifically provided in section 109, no provision of 
this Act, and no amendment made by this Act to any other provision of 
law, may be construed as superseding any provision of the law of any 
State which imposes additional requirements or establishes higher 
standards for the safe and sound operation and condition of depository 
institutions (as defined in section 3 of the Federal Deposit Insurance 
Act) and the protection of consumers than the requirements imposed or 
the standards established under this Act and the amendments made by 
this Act to other provisions of law (including capital standards and 
other safeguards placed on affiliates).

SEC. 128. CONFORMING AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF 
              1956.

    (a) Short Title; Table of Contents.--The first section of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841 nt.) is amended to read as 
follows:

``SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    ``(a) Short Title.--This Act may be cited as the `Financial 
Services Holding Company Act of 1995'.
    ``(b) Table of Contents.--The table of contents for this Act is as 
follows:

``Sec. 1.  Short title; table of contents.
``Sec. 2.  Definitions.
``Sec. 3.  Acquisition of bank shares or assets.
``Sec. 4.  Interests in nonbanking organizations.
``Sec. 5.  Administration.
``Sec. 6.  Conversion of unitary savings and loan holding companies to 
                            financial services holding companies.
``Sec. 7.  Reservation of rights to States.
``Sec. 8.  Penalties.
``Sec. 9.  Judicial review.
``Sec. 10. Securities activities.
``Sec. 11. Safeguards relating to securities activities.
``Sec. 12. Investment bank holding companies and other financial 
                            activities.
``Sec. 13. Saving provision.
``Sec. 14. Separability of provisions.
    ``(c) References in Other Laws.--Any reference in any Federal or 
State law to a provision of the Bank Holding Company Act of 1956 shall 
be deemed to be a reference to the corresponding provision of this 
Act.''.
    (b) Definitions.--
            (1) Subsection (n) of section 2 of the Bank Holding Company 
        Act of 1956 (12 U.S.C. 1841(n)) is amended by inserting 
        ```depository institution','' before ```insured depository 
        institution'''.
            (2) Subsection (o) of section 2 of the Bank Holding Company 
        Act of 1956 (12 U.S.C. 1841(o)) is amended--
                    (A) by striking paragraph (1) and inserting the 
                following new paragraph:
            ``(1) Lead depository institution.--The term `lead 
        depository institution' means the largest depository 
        institution controlled by the financial services holding 
        company, based on a comparison of the average total assets 
        controlled by each depository institution during the previous 
        12-month period.''; and
                    (B) by adding at the end the following new 
                paragraphs:
            ``(8) Insured depository institution for certain 
        sections.--Notwithstanding subsection (n), the terms 
        `depository institution' and `insured depository institution' 
        include, for purposes of paragraph (1) and sections 4(k), 10, 
        and 11, any branch, agency, or commercial lending company 
        operated in the United States by a foreign bank.
            ``(9) Well managed.--The term `well managed' means--
                    ``(A) in the case of any company or depository 
                institution which receives examinations, the 
                achievement of--
                            ``(i) a CAMEL composite rating of 1 or 2 
                        (or an equivalent rating under an equivalent 
                        rating system) in connection with the most 
                        recent examination or subsequent review of such 
                        company or institution; and
                            ``(ii) at least a satisfactory rating for 
                        management, if such rating is given; or
                    ``(B) in the case of a company or depository 
                institution that has not received an examination 
                rating, the existence and use of managerial resources 
                which the Board determines are satisfactory.''.
            (3) Section 2 of the Bank Holding Company Act of 1956 (12 
        U.S.C. 1841) (as amended by section 116(a)(1) of this Act) is 
        amended by inserting after subsection (o) the following new 
        subsections:
    ``(p) Securities Affiliate.--The term `securities affiliate' means 
any company--
            ``(1) that is (or is required to be) registered under the 
        Securities Exchange Act of 1934 as a broker or dealer; and
            ``(2) the acquisition or retention of the shares or assets 
        of which the Board has approved under section 10.
    ``(q) Capital Terms.--
            ``(1) Depository institutions.--With respect to depository 
        institutions, the terms `well capitalized,' `adequately 
        capitalized' and `undercapitalized' have the meanings given to 
        such terms in accordance with section 38(b) of the Federal 
        Deposit Insurance Act.
            ``(2) Financial services holding company.--The following 
        definitions shall apply with respect to financial services 
        holding companies:
                    ``(A) Adequately capitalized.--The term `adequately 
                capitalized' means a level of capitalization which 
                meets or exceeds the required minimum level established 
                by the Board for each relevant capital measure for 
                financial services holding companies.
                    ``(B) Well capitalized.--The term `well 
                capitalized' means a level of capitalization which 
                meets or exceeds the required capital levels 
                established by the Board for well capitalized financial 
                services holding companies.
            ``(3) Other capital terms.--The terms `tier 1' and `risk-
        weighted assets' have the meaning given
         those terms in the capital guidelines or regulations 
established by the Board for financial services holding companies.
    ``(r) Foreign Bank Terms.--For purposes of subsections (s) and (u), 
sections 4(k), 10, and 11, and subsections (b) and (c) of section 12--
            ``(1) the terms `agency', `branch', and `commercial lending 
        company' have the same meaning as in section 1(b) of the 
        International Banking Act of 1978.
            ``(2) the term `foreign bank' means a foreign bank (as 
        defined in section 1(b) of the International Banking Act of 
        1978) which operates a branch, agency or commercial lending 
        company, or owns or controls a bank, in the United States.''.
    (c) Amendment Regarding Conditional Approval of Notices.--Section 
4(a)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(a)(2)) 
is amended by striking ``paragraph (8)'' and all that follows through 
``issued by the Board under such paragraph'' and inserting ``subsection 
(c)(8) or section 4(k), 10, or 11, subject to all the conditions 
specified in those provisions or in any order or regulation issued by 
the Board under those provisions''.
    (d) Amendment to Notice Procedures.--Section 4(j) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1843(j)) is amended--
            (1) in paragraph (1)(A), by striking ``subsection (c)(8) or 
        (a)(2)'' and inserting ``subsection (a)(2), (c)(8), (c)(15), or 
        (k)'';
            (2) in paragraph (1)(E)--
                    (A) by striking ``subsection (c)(8) or (a)(2)'' and 
                inserting ``subsection (a)(2), (c)(8), (c)(15), or 
                (k)''; and
                    (B) by striking the last sentence and inserting the 
                following: ``In no event may the Board, without the 
                agreement of the financial services holding company 
                submitting the notice, extend the notice period under 
                this subparagraph beyond the period that ends 180 days 
                after the date that a notice is filed with the Board or 
                the relevant Federal reserve bank in accordance with 
                the regulations of the Board.''; and
            (3) in paragraph (2), by redesignating subparagraphs (B) 
        and (C) as subparagraphs (C) and (D), respectively, and 
        inserting after subparagraph (A) the following new 
        subparagraph:
                    ``(B) Criteria for notices involving securities 
                affiliates.--In considering any notice that involves 
                the acquisition of shares of a securities affiliate 
                pursuant to section 4(c)(15), the Board shall apply the 
                criteria and safeguards contained in this paragraph and 
                in sections 10 and 11.''.
    (e) Elimination of Obsolete Provisions.--The Bank Holding Company 
Act of 1956 (12 U.S.C. 1841 through 1849) is amended--
            (1) in section 4(a)(2)--
                    (A) by striking ``or in the case of a company'' and 
                ending ``after December 31, 1980,''; and
                    (B) by striking the sentence beginning 
                ``Notwithstanding any other provision of this 
                paragraph'';
            (2) in section 4(b), by striking ``After two years from the 
        date of enactment of this Act, no'' and inserting ``No''; and
            (3) in section 5(a)--
                    (A) by striking ``Within one hundred and eighty 
                days after the date of enactment of this Act, or 
                within'' and inserting ``Within''; and
                    (B) by striking ``whichever is later,''.
    (f) Conforming Amendments.--The Bank Holding Company Act of 1956 
(12 U.S.C. 1841 et seq.) is amended as follows:
            (1) In section 3(c)(4), by striking ``one-bank holding 
        company'' each place such term appears and inserting ``1-bank 
        financial services holding company''.
            (2) In section 3(f)(5), by striking ``bank holding 
        company'' the first and second time such term appears and 
        inserting ``financial services holding company''.
            (3) In section 4(i)(3)(A), by striking ``is acquired'' and 
        inserting ``was acquired''.
            (4) By striking ``bank holding companies'' each place such 
        appears in the following sections and inserting ``financial 
        services holding companies'':
                    (A) Section 3(d).
                    (B) Section 4(f).
                    (C) Section 7(a).
            (5) By striking ``bank holding company's'' each place such 
        term appears in section 4(c)(14) and inserting ``financial 
        services holding company's''.
            (6) By striking ``bank holding company'' each place such 
        term appears in the following sections and inserting 
        ``financial services holding company'':
                    (A) Subsections (a), (d), (e), (g), (h), and (o) of 
                section 2.
                    (B) Subsections (a), (b), (d), (f)(1), (f)(2), and 
                (f)(3) of section 3.
                    (C) Subsections (a), (d), (e), (g), (h), and (j) of 
                section 4.
                    (D) Clause (ii) in the portion of section 4(c) 
                which precedes paragraph (1) of such section.
                    (E) Paragraphs (2), (3), (7), (8), (10), (11), 
                (12)(A), and (14) of section 4(c).
                    (F) Paragraphs (4), (5), and (9) of section 4(f).
                    (G) Paragraphs (1) and (2) of section 4(i).
                    (H) Sections 5, 7(b), 8, and 11.
            (7) In section 4(f)(1), by striking ``bank holding 
        company'' the 2d place such term appears and inserting 
        ``financial services holding company''.
            (8) In the headings for section 3(f) and 4(f), by striking 
        ``Bank Holding'' and inserting ``Financial Services Holding''.
            (9) In the heading the heading for section 2(o)(7), by 
        striking ``bank'' and inserting ``financial services''.
    (g) Treatment of Existing Bank Holding Companies.--Section 2(a)(6) 
of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(6)) is 
amended by inserting at the end the following: ``Any company that was a 
bank holding company on the day before the date of enactment of the 
Financial Services Competitiveness Act of 1995 shall, for purposes of 
this chapter, be deemed to have been a financial services holding 
company as of the date on which the company became a bank holding 
company.''.
    (h) Other References.--Any reference in any Federal law to ``bank 
holding company'' or ``bank holding companies'' as those terms were 
defined under the Bank Holding Company Act of 1956 before the enactment 
of this Act shall be deemed to include a reference to ``financial 
services holding company'' and ``financial services holding 
companies'', respectively, as such terms are defined under the 
Financial Services Holding Company Act of 1995.

SEC. 129. CONFORMING AMENDMENTS TO THE BANK HOLDING COMPANY ACT 
              AMENDMENTS OF 1970.

    Section 106 of the Bank Holding Company Act Amendments of 1970 (12 
U.S.C. 1971 through 1978) is amended by striking ``bank holding 
company'' each place such term appears and inserting ``financial 
services holding company''.

SEC. 130. CREDIT CARDS FOR BUSINESS PURPOSES.
    Section 2(c)(2)(F) of the Bank Holding Company Act of 1956 
(relating to the definition of credit card banks) is amended--
            (1) in clause (i), by inserting ``including the provision 
        of credit card accounts for business purposes'' before the 
        semicolon; and
            (2) in clause (v), by inserting ``(other than the provision 
        of credit card accounts for business purposes in connection 
        with the credit card operations referred to in clause (i))'' 
        before the period.

    Subtitle D--Interagency Banking and Financial Services Advisory 
                               Committee

SEC. 141. INTERAGENCY BANKING AND FINANCIAL SERVICES ADVISORY 
              COMMITTEE.
    (a) Establishment; Composition.--There is established the Banking 
and Financial Services Advisory Committee which shall consist of 6 
members as follows:
            (1) The Secretary of the Treasury.
            (2) The Chairman of the Board of Governors of the Federal 
        Reserve System.
            (3) The Chairperson of the Board of Directors of the 
        Federal Deposit Insurance Corporation.
            (4) The Chairman of the Securities and Exchange Commission.
            (5) The Chairperson of the Commodities Futures Trading 
        Commission.
            (6) The Comptroller of the Currency.
    (b) Chairperson.--The chairperson of the Committee shall be the 
Secretary of the Treasury.
    (c) Designation of Officers and Employees.--The members of the 
Committee may, from time to time, designate other officers or employees 
of their respective agencies to carry out their duties on the 
Committee.
    (d) Compensation and Expenses.--Each member of the Committee shall 
serve without additional compensation but shall be entitled to 
reasonable expenses incurred in carrying out official duties as a 
member.
    (e) Function of the Committee.--
            (1) In general.--The Committee shall meet as appropriate to 
        consider matters of mutual interest to the members and to 
        consider making recommendations to the Board of Governors of 
        the Federal Reserve System regarding the types of activities 
        that may be financial in nature for purposes of the Financial 
        Services Holding Company Act and to the Comptroller of the 
        Currency regarding the types of activities that may be 
        incidental to banking for purposes of section 5136 of the 
        Revised Statutes of the United States.
            (2) Consideration of recommendations.--The Board of 
        Governors of the Federal Reserve System and the Comptroller of 
        the Currency, as appropriate, shall take into account any 
        recommendation made to the respective agency by the Committee 
        and, if the agency does not adopt the recommendation, shall 
        provide a written explanation to the Committee.
    (f) Improving the Supervision, Efficiency, and Competitiveness of 
the Financial Services Industry.--
            (1) In general.--The Committee shall seek to improve the 
        supervision, efficiency, and competitiveness of the financial 
        services industry by making recommendations for such 
        legislative or administrative action as the Committee 
        determines to be appropriate to the Congress, each agency or 
        office represented by a member on the Committee, and other 
        agencies or departments of the United States, including 
        recommendations for changes in law and in the regulations, 
        policies, and procedures of any department or agency.
            (2) Printing in federal register.--Recommendations from 
        paragraph (1) shall be printed in the Federal Register and 
        submitted to the Committee on Banking and Financial Services of 
        the House of Representatives and the Committee on Banking, 
        Housing, and Urban Affairs of the Senate.

                    TITLE II--FUNCTIONAL REGULATION

                    Subtitle A--Brokers and Dealers

SEC. 201. DEFINITION OF BROKER.

    (a) In General.--Section 3(a)(4) of the Securities Exchange Act of 
1934 (15 U.S.C. 78c(a)(4)) is amended to read as follows:
            ``(4) Broker.--
                    ``(A) In general.--The term `broker' means any 
                person engaged in the business of effecting 
                transactions in securities for the account of others.
                    ``(B) Exclusion of banks.--The term `broker' does 
                not include a bank unless such bank--
                            ``(i) publicly solicits the business of 
                        effecting securities transactions for the 
                        account of others;
                            ``(ii) is compensated for such business by 
                        the payment of commissions or similar 
                        remuneration based on effecting transactions in 
                        securities (other than fees calculated as a 
                        percentage of assets under management) in 
                        excess of the bank's incremental costs directly 
                        attributable to effecting such transactions 
                        (hereafter referred to as `incentive 
                        compensation'); or
                            ``(iii) is a separately identifiable 
                        department or division of the bank.
                    ``(C) Exemption for certain bank activities.--A 
                bank shall not be deemed to be a broker because it 
                engages in any of the following activities under the 
                conditions described:
                            ``(i) Third party brokerage arrangements.--
                        The bank enters into a contractual or other 
                        arrangement with a broker or dealer registered 
                        under this title under which the broker or 
                        dealer offers brokerage services on or off the 
                        premises of the bank if--
                                    ``(I) such broker or dealer is 
                                clearly identified as the person 
                                performing the brokerage services;
                                    ``(II) the broker or dealer 
                                performs brokerage services in an area 
                                that is clearly marked and, unless made 
                                impossible by space or personnel 
                                considerations, physically separate 
                                from the routine deposit-taking 
                                activities of the bank;
                                    ``(III) any materials used by the 
                                bank to advertise or promote generally 
                                the availability of brokerage services 
                                under the contractual or other 
                                arrangement clearly indicate that the 
                                brokerage service are being provided by 
                                the broker or dealer and not by the 
                                bank;
                                    ``(IV) any materials used by the 
                                bank to advertise or promote generally 
                                the availability of brokerage services 
                                under the contractual or other 
                                arrangement are in compliance with the 
                                Federal securities laws before 
                                distribution;
                                    ``(V) bank employees perform only 
                                clerical or ministerial functions in 
                                connection with brokerage transactions, 
                                including scheduling appointments with 
                                the associated persons of a broker or 
                                dealer and, on behalf of a broker or 
                                dealer, transmitting orders or handling 
                                customers funds or securities, except 
                                that bank employees who are not so 
                                qualified may describe in general terms 
                                investment vehicles under the 
                                contractual or other arrangement and 
                                accept customer orders on behalf of the 
                                broker or dealer if such employees have 
                                received training that is substantially 
                                equivalent to the training required for 
                                personnel qualified to sell securities 
                                pursuant to the requirements of a self-
                                regulatory organization (as defined in 
                                section 3(a) of the Securities Exchange 
                                Act of 1934);
                                    ``(VI) bank employees do not 
                                directly receive incentive compensation 
                                for any brokerage transaction unless 
                                such employees are associated persons 
                                of a broker or dealer and are qualified 
                                pursuant to the requirements of a self-
                                regulatory organization (as so defined) 
                                except that the bank employees may 
                                receive nominal cash and noncash 
                                compensation for customer referrals if 
                                the cash compensation is a 1-time fee 
                                of a fixed dollar amount and the 
                                payment of the fee is not contingent on 
                                whether the referral results in a 
                                transaction;
                                    ``(VII) such services are provided 
                                by the broker or dealer on a basis in 
                                which all customers which receive any 
                                services are fully disclosed to the 
                                broker or dealer; and
                                    ``(VIII) the broker or dealer 
                                informs each customer that the 
                                brokerage services are provided by the 
                                broker or dealer and not by the bank 
                                and that the securities are not 
                                deposits or other obligations of the 
                                bank, are not guaranteed by the bank, 
                                and are not insured by the Federal 
                                Deposit Insurance Corporation.
                            ``(ii) Trust activities.--The bank engages 
                        in trust activities (including effecting 
                        transactions in the course of such trust 
                        activities) permissible for national banks 
                        under the first section of the Act of September 
                        28, 1962, or for State banks under relevant 
                        State trust statutes or law (including 
                        securities safekeeping, self-directed 
                        individual retirement accounts, or managed 
                        agency accounts or other functionally 
                        equivalent accounts of a bank) unless the 
                        bank--
                                    ``(I) publicly solicits brokerage 
                                business, other than by advertising 
                                that it effects transactions in 
                                securities in conjunction with 
                                advertising its other trust activities; 
                                or
                                    ``(II) receives incentive 
                                compensation for such brokerage 
                                activities.
                            ``(iii) Permissible securities 
                        transactions.--The bank effects transactions in 
                        exempted securities, other than municipal 
                        securities, or in commercial paper, bankers 
                        acceptances, commercial bills, qualified 
                        Canadian Government obligations as defined in 
                        section 5136 of the Revised Statues, 
                        obligations of the Washington Metropolitan Area 
                        Transit Authority which are guaranteed by the 
                        Secretary of Transportation under section 9 of 
                        the National Capital Transportation Act of 
                        1969, obligations of the North American 
                        Development Bank, and obligations of any local 
                        public agency (as defined in section 110(h) of 
                        the Housing Act of 1949) or any public housing 
                        agency (as defined in the United States Housing 
                        Act of 1937) that are expressly authorized by 
                        section 5136 of the Revised Statutes of the 
                        United States as permissible for a national 
                        bank to underwrite or deal in.
                            ``(iv) Municipal securities.--The bank 
                        effects transactions in municipal securities.
                            ``(v) Employee and shareholder benefit 
                        plans.--The bank effects transactions as part 
                        of any bonus, profit-sharing, pension, 
                        retirement, thrift, savings, incentive, stock 
                        purchase, stock ownership, stock appreciation, 
                        stock option, dividend reinvestment, or similar 
                        plan for employees or shareholders of an issuer 
                        or its subsidiaries.
                            ``(vi) Sweep accounts.--The bank effects 
                        transactions as part of a program for the 
                        investment or reinvestment of bank deposit 
                        funds into any no-load, open-end management 
                        investment company registered under the 
                        Investment Company Act of 1940 that holds 
                        itself out as a money market fund.
                            ``(vii) Affiliate transactions.--The bank 
                        effects transactions for the account of any 
                        affiliate of the bank, as defined in section 2 
                        of the Financial Services Holding Company Act 
                        of 1995.
                            ``(viii) Private securities offerings.--The 
                        bank--
                                    ``(I) effects sales as part of a 
                                primary offering of securities by an 
                                issuer, not involving a public 
                                offering, pursuant to section 3(b), 
                                4(2), or 4(6) of the Securities Act of 
                                1933 and the rules and regulations 
                                issued thereunder;
                                    ``(II) effects such sales 
                                exclusively to an accredited investor, 
                                as defined in section 3 of the 
                                Securities Act of 1933; and
                                    ``(III) if affiliated with a 
                                securities affiliate, as provided under 
                                section 10 of the Financial Services 
                                Holding Company Act of 1995--
                                            ``(aa) has not been so 
                                        affiliated for more than 1 
                                        year; or
                                            ``(bb) effects such sales 
                                        through a separately 
                                        identifiable department or 
                                        division that itself shall be 
                                        deemed to be a broker.
                            ``(ix) De minimis exemption.--If the bank 
                        does not have a subsidiary or affiliate 
                        registered as a broker or dealer under section 
                        15, the bank effects, other than in 
                        transactions referenced in clauses (i) through 
                        (viii), not more than--
                                    ``(I) 800 transactions in any 
                                calendar year in securities for which a 
                                ready market exists, and
                                    ``(II) 200 other transactions in 
                                securities in any calendar year.
                            ``(x) Safekeeping and custody services.--
                        The bank, as part of customary banking 
                        activities--
                                    ``(I) provides safekeeping or 
                                custody services with respect to 
                                securities, including the exercise of 
                                warrants or other rights on behalf of 
                                customers;
                                    ``(II) clears or settles 
                                transactions in securities;
                                    ``(III) effects securities lending 
                                or borrowing transactions with or on 
                                behalf of customers as part of services 
                                provided to customers pursuant to 
                                subclauses (I) and (II) or invests cash 
                                collateral pledged in connection with 
                                such transactions; or
                                    ``(IV) holds securities pledged by 
                                1 customer to another customer or 
                                securities subject to resale agreements 
                                between customers or facilitates the 
                                pledging or transfer of such securities 
                                by book entry.
                            ``(xi) Banking products.--The bank effects 
                        transactions that have been determined pursuant 
                        to section 10(k)(3)(C) to be more appropriately 
                        treated as banking products, if the bank 
                        effects such transactions through a separately 
                        identifiable department or division that itself 
                        shall be deemed to be a broker.
                    ``(D) Exemption for entities subject to section 
                15(e).--The term `broker' does not include a bank 
                that--
                            ``(i) was, immediately prior to the 
                        enactment of the Financial Services 
                        Competitiveness Act of 1995, subject to section 
                        15(e); and
                            ``(ii) is subject to such restrictions and 
                        requirements as the Commission deems 
                        appropriate.''.
    (b) Separately Identifiable Department or Division Defined.--
Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) 
is amended by adding at the end the following new paragraph:
            ``(54) For purposes of paragraphs (4) and (5), the term 
        `separately identifiable department or division' of a bank 
        means a unit--
                    ``(A) that is under the direct supervision of an 
                officer or officers designated by the board of 
                directors of the bank as responsible for the day-to-day 
                conduct of the bank's activities, including the 
                supervision of all bank employees engaged in the 
                performance of such activities; and
                    ``(B) for which all of the records relating to its 
                activities described in paragraphs (4) and (5) are 
                separately maintained in or extractable from such 
                unit's own facilities or the facilities of the bank, 
                and such records are so maintained or otherwise 
                accessible as to permit independent examination and 
                enforcement of this Act and rules and regulations 
                promulgated under this Act.''.
    (c) Regulation.--Section 15(c) of the Securities Exchange Act of 
1934 (15 U.S.C. 78o(c)) is amended by adding at the end the following 
new paragraph:
            ``(8)(A) The Commission may prescribe rules, after 
        consultation with and considering the views of the appropriate 
        Federal banking agencies, with respect to a broker or dealer 
        that is a separately identifiable department or division of a 
        bank as the Commission finds necessary in the public interest 
        or for the protection of investors to take into account the 
        characteristics of a separately identifiable department or 
        division of a bank.
            ``(B) If a bank of which a separately identifiable 
        department or division is a part is adequately capitalized (as 
        defined by the bank's appropriate Federal banking agency), the 
        separately identifiable department or division that is a broker 
        or dealer shall be deemed to be in compliance with the net 
        capital rules adopted pursuant to paragraph (3).''.

SEC. 202. DEFINITION OF DEALER.

    Section 3(a)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(5)) is amended to read as follows:
            ``(5) Dealer.--
                    ``(A) In general.--The term `dealer' means any 
                person engaged in the business of buying and selling 
                securities for his own account through a broker or 
                otherwise.
                    ``(B) Exceptions.--Such term does not include--
                            ``(i) a person that buys or sells 
                        securities for such person's own account, 
                        either individually or in a fiduciary capacity, 
                        but not as a part of a regular business; or
                            ``(ii) a bank, to the extent that the 
                        bank--
                                    ``(I) buys and sells commercial 
                                paper, bankers acceptances, exempted 
                                securities (other than municipal 
                                securities), qualified Canadian 
                                Government obligations as defined in 
                                section 5136 of the Revised Statues, 
                                obligations of the Washington 
                                Metropolitan Area Transit Authority 
                                which are guaranteed by the Secretary 
                                of Transportation under section 9 of 
                                the National Capital Transportation Act 
                                of 1969, obligations of the North 
                                American Development Bank, and 
                                obligations of any local public agency 
                                (as defined in section 110(h) of the 
                                Housing
                                 Act of 1949) or any public housing 
agency (as defined in the United States Housing Act of 1937) that are 
expressly authorized by section 5136 of the Revised Statutes of the 
United States as permissible for a national bank to underwrite or deal 
in;
                                    ``(II) buys and sells municipal 
                                securities;
                                    ``(III) buys and sells securities 
                                for investment purposes for the bank or 
                                for accounts for which the bank acts as 
                                a trustee or fiduciary;
                                    ``(IV) engages in the issuance or 
                                sale of designated asset-back 
                                securities through a grantor trust or 
                                otherwise and--
                                            ``(aa) has not been 
                                        affiliated with a securities 
                                        affiliate under section 10 of 
                                        the Financial Services Holding 
                                        Company Act of 1995 for more 
                                        than 1 year; or
                                            ``(bb) effects such 
                                        transactions through a 
                                        separately identifiable 
                                        department or division that 
                                        itself shall be deemed to be a 
                                        dealer; or
                                    ``(V) buys and sells securities 
                                that have been determined pursuant to 
                                section 10(k)(3)(C) to be more 
                                appropriately treated as banking 
                                products, if a separately identifiable 
                                department or division that itself is 
                                deemed to be a broker or dealer for 
                                purposes of this Act engages in such 
                                purchases and sales.
                    ``(C) Designated asset-backed securities defined.--
                For purposes of subparagraph (B)(ii)(IV), the term 
                `designated asset-backed securities' means--
                            ``(i) securities backed by or representing 
                        an interest in 1-4 family residential mortgages 
                        originated or purchased by the bank, its 
                        affiliates, or its subsidiaries; and
                            ``(ii) securities backed by or representing 
                        an interest in consumer receivables or consumer 
                        leases originated or purchased by the bank, its 
                        affiliates, or its subsidiaries.''.

SEC. 203. POWER TO EXEMPT FROM THE DEFINITIONS OF BROKER AND DEALER.

    Section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c) is 
amended by adding at the end the following:
    ``(e) Exemption From Definition of Broker or Dealer.--The 
Commission, by regulation or order, upon its own motion or upon 
application, may conditionally or unconditionally exclude any person or 
class of persons from the definitions of `broker' or `dealer', if the 
Commission finds that such exclusion is consistent with the public 
interest, the protection of investors, and the purposes of this 
title.''.

SEC. 204. MARGIN REQUIREMENTS.

    (a) Section 7(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
15g(d)) is amended by striking ``or (E)'' and inserting ``(E) to a loan 
to a broker or dealer by a member bank or any other person that has 
entered into an agreement pursuant to section 8(a) if the proceeds of 
the loan are to be used in the ordinary course of the broker's or 
dealer's business other than for the purpose of funding the purchase of 
securities for the account of such broker or dealer, or (F)''.
    (b) Section 8(a) of the Securities and Exchange Act of 1934 is 
amended--
            (1) by striking ``nonmember bank'' and inserting ``person 
        other than a member bank''; and
            (2) by striking ``such bank'' in the second sentence and 
        inserting ``such person''.

SEC. 205. EFFECTIVE DATE.

    This subtitle shall become effective 270 days after the date of 
enactment of this Act.

             Subtitle B--Bank Investment Company Activities

SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY AFFILIATED BANK.

    (a) Management Companies.--Section 17(f) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-17(f)) is amended--
            (1) by redesignating paragraphs (1), (2), and (3) as 
        subparagraphs (A), (B), and (C), respectively;
            (2) by striking ``(f) Every registered'' and inserting 
        ``(f) Custody of Securities.--
            ``(1) Every registered'';
            (3) by designating the 2d, 3d, 4th, and 5th sentences of 
        such subsection as paragraphs (2) through (5), respectively, 
        and indenting the left margin of such paragraphs appropriately; 
        and
            (4) by adding at the end the following new paragraph:
            ``(6) Notwithstanding any provision of this subsection, if 
        a bank described in paragraph (1) or an affiliated person of 
        such bank is an affiliated person, promoter, organizer, or 
        sponsor of, or principal underwriter for the registered 
        company, such bank may serve as custodian under this subsection 
        in accordance with such rules, regulations, or orders as the 
        Commission may prescribe, consistent with the protection of 
        investors, after consulting in writing with the appropriate 
        Federal banking agency, as defined in section 3 of the Federal 
        Deposit Insurance Act.''.
    (b) Unit Investment Trusts.--Section 26(a)(1) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-26(a)(1)) is amended by inserting 
before the semicolon at the end the following: ``, except that, if the 
trustee or custodian described in this subsection is an affiliated 
person of such underwriter or depositor, the Commission may adopt rules 
and regulations or issue orders, consistent with the protection of 
investors, prescribing the conditions under which such trustee or 
custodian may serve, after consulting in writing with the appropriate 
Federal banking agency (as defined in section 3 of the Federal Deposit 
Insurance Act)''.
    (c) Fiduciary Duty of Custodian.--Section 36(a) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-35(a)) is amended--
            (1) in paragraph (1), by striking ``or'' at the end;
            (2) in paragraph (2), by striking the period at the end and 
        inserting ``; or ``; and
            (3) by inserting after paragraph (2) the following:
            ``(3) as custodian.''.

SEC. 212. INDEBTEDNESS TO AFFILIATED PERSON.

    Section 10(f) of the Investment Company Act of 1940 (15 U.S.C. 80a-
10(f)) is amended--
            (1) in the 1st sentence, by striking ``issuer) a principal 
        underwriter'' and inserting ``issuer)--
            ``(1) a principal underwriter''; and
            (2) by striking ``for the issuer. The Commission'' and 
        inserting ``for the issuer; or
            ``(2) the issuer of which has a material lending 
        relationship with the adviser of such registered investment 
        company or any person controlling, controlled by, or under 
        common control with the adviser in contravention of such rules, 
        regulations, or orders as the Commission may prescribe in the 
        public interest and consistent with the protection of 
        investors.
The Commission''.

SEC. 213. LENDING TO AN AFFILIATED INVESTMENT COMPANY.

    Section 18 of the Investment Company Act of 1940 (15 U.S.C. 80a-18) 
is amended by adding at the end the following:
    ``(l) Notwithstanding any provision of this section, it shall be 
unlawful for any affiliated person of a registered investment company 
or any affiliated person of such a person to loan money to such 
investment company in contravention of such rules, regulations, or 
orders as the Commission may prescribe in the public interest and 
consistent with the protection of investors.''.

SEC. 214. INDEPENDENT DIRECTORS.

    (a) In General.--Section 2(a)(19)(A) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-2(a)(19)(A)) is amended--
            (1) by striking clause (v) and inserting the following new 
        clause:
                            ``(v) any person (other than a registered 
                        investment company) that, at any time during 
                        the preceding 6 months, has executed any 
                        portfolio transactions for, engaged in any 
                        principal transactions with, or distributed 
                        shares for--
                                    ``(I) the investment company,
                                    ``(II) any other investment company 
                                having the same investment adviser as 
                                such investment company or holding 
                                itself out to investors as a related 
                                company for purposes of investment or 
                                investor services, or
                                    ``(III) any account over which the 
                                investment company's investment adviser 
                                has brokerage placement discretion,
                        or any affiliated person of such a person,'';
            (2) by redesignating clause (vi) as clause (vii); and
            (3) by inserting after clause (v) the following new clause:
                            ``(vi) any person (other than a registered 
                        investment company) that, at any time during 
                        the preceding 6 months, has loaned money to--
                                    ``(I) the investment company,
                                    ``(II) any other investment company 
                                having the same investment adviser as 
                                such investment company or holding 
                                itself out to investors as a related 
                                company for purposes of investment or 
                                investor services, or
                                    ``(III) any account for which the 
                                investment company's investment adviser 
                                has borrowing authority,
                        or any affiliated person of such a person, 
                        or''.
    (b) Affiliation of Directors.--Section 10(c) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-10(c)) is amended by striking 
``bank, except'' and inserting ``bank (and its subsidiaries) or any 
single financial services holding company (and its affiliates and 
subsidiaries), as those terms are defined in the Financial Services 
Holding Company Act of 1995, except''.
    (c) Effective Date.--The provisions of subsection (a) of this 
section shall become effective 1 year after the date of enactment of 
this subtitle.

SEC. 215. ADDITIONAL SEC DISCLOSURE AUTHORITY.

    (a) Misrepresentation.--Section 35(a) of the Investment Company Act 
of 1940 (15 U.S.C. 80a-34(a)) is amended to read as follows:
    ``(a) Misrepresentation of Guarantees.--
            ``(1) In general.--It shall be unlawful for any person, 
        issuing or selling any security of which a registered 
        investment company is the issuer, to represent or imply in any 
        manner whatsoever that such security or company--
                    ``(A) has been guaranteed, sponsored, recommended, 
                or approved by the United States, or any agency, 
                instrumentality or officer of the United States;
                    ``(B) has been insured by the Federal Deposit 
                Insurance Corporation; or
                    ``(C) is guaranteed by or is otherwise an 
                obligation of any bank or insured depository 
                institution.
            ``(2) Disclosures.--Any person issuing or selling the 
        securities of a registered investment company shall prominently 
        disclose that the investment company or any security issued by 
        the investment company--
                    ``(A) is not insured by the Federal Deposit 
                Insurance Corporation;
                    ``(B) is not guaranteed by an affiliated insured 
                depository institution; and
                    ``(C) is not otherwise an obligation of any bank or 
                insured depository institution,
        in accordance with such rules, regulations, or orders as the 
        Commission may prescribe as reasonably necessary or appropriate 
        in the public interest for the
         protection of investors, after consulting in writing with the 
appropriate Federal banking agencies.
            ``(3) Definitions.--The terms `insured depository 
        institution' and `appropriate Federal banking agency' have the 
        meanings given to such terms in section 3 of the Federal 
        Deposit Insurance Act.''.
    (b) Deceptive Use of Names.--Section 35(d) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-34(d)) is amended to read as 
follows:
    ``(d)(1) It shall be unlawful for any registered investment company 
to adopt as part of the name or title of such company, or of any 
securities of which it is the issuer, any word or words that the 
Commission finds are materially deceptive or misleading. The Commission 
may adopt such rules or regulations or issue such orders as are 
necessary or appropriate to prevent the use of deceptive or misleading 
names or titles by investment companies.
    ``(2) It shall be deceptive and misleading for any registered 
investment company (A) that is an affiliated person of a bank or an 
affiliated person of such a person, or (B) for which a bank or an 
affiliated person of a bank acts as investment adviser, sponsor, 
promoter, or principal underwriter, to adopt, as part of the name or 
title of such company, or of any security of which it is an issuer, any 
word that is the same or similar to, or a variation of, the name or 
title of such bank or affiliated person thereof, in contravention of 
such rules, regulations, or orders as the Commission may prescribe as 
necessary or appropriate in the public interest or for the protection 
of investors.''.

SEC. 216. DEFINITION OF BROKER UNDER THE INVESTMENT COMPANY ACT OF 
              1940.

    Section 2(a)(6) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(6)) is amended to read as follows:
            ``(6) `Broker' has the same meaning as in the Securities 
        Exchange Act of 1934, except that it does not include any 
        person solely by reason of the fact that such person is an 
        underwriter for 1 or more investment companies.''.

SEC. 217. DEFINITION OF DEALER UNDER THE INVESTMENT COMPANY ACT OF 
              1940.

    Section 2(a)(11) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(11)) is amended to read as follows:
            ``(11) The term `dealer' has the same meaning as in the 
        Securities Exchange Act of 1934, but does not include an 
        insurance company or investment company.''.

SEC. 218. REMOVAL OF THE EXCLUSION FROM THE DEFINITION OF INVESTMENT 
              ADVISER FOR BANKS THAT ADVISE INVESTMENT COMPANIES.

    (a) Investment Adviser.--Section 202(a)(11) of the Investment 
Advisers Act of 1940 (15 U.S.C. 80b-2(a)(11)) is amended in 
subparagraph (A), by striking ``investment company'' and inserting 
``investment company, except that the term `investment adviser' 
includes any bank or financial services holding company to the extent 
that such bank or financial services holding company acts as an 
investment adviser to a registered investment company, or if, in the 
case of a bank, such services are performed through a separately 
identifiable department or division, the department or division, and 
not the bank itself, shall be deemed to be the investment adviser''.
    (b) Separately Identifiable Department or Division.--Section 202(a) 
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)) is amended 
by adding at the end the following:
            ``(25) The term `separately identifiable department or 
        division' of a bank means a unit--
                    ``(A) that is under the direct supervision of an 
                officer or officers designated by the board of 
                directors of the bank as responsible for the day-to-day 
                conduct of the bank's investment adviser activities for 
                1 or more investment companies, including the 
                supervision of all bank employees engaged in the 
                performance of such activities; and
                    ``(B) for which all of the records relating to its 
                investment adviser activities are separately maintained 
                in or extractable from such unit's own facilities or 
                the facilities of the bank, and such records are so 
                maintained or otherwise accessible as to permit 
                independent examination and enforcement of this Act or 
                the Investment Company Act of 1940 and rules and 
                regulations promulgated under this Act or the 
                Investment Company Act of 1940.''.

SEC. 219. DEFINITION OF BROKER UNDER THE INVESTMENT ADVISERS ACT OF 
              1940.

    Section 202(a)(3) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-2(a)(3)) is amended to read as follows:
            ``(3) The term `broker' has the same meaning as in the 
        Securities Exchange Act of 1934.''.

SEC. 220. DEFINITION OF DEALER UNDER THE INVESTMENT ADVISERS ACT OF 
              1940.

    Section 202(a)(7) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-2(a)(7)) is amended to read as follows:
            ``(7) The term `dealer' has the same meaning as in the 
        Securities Exchange Act of 1934, but does not include an 
        insurance company or investment company.''.

SEC. 221. INTERAGENCY CONSULTATION.

    The Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) is 
amended by inserting after section 210 the following new section:

``SEC. 210A. CONSULTATION.

    ``(a) Examination Results and Other Information.--
            ``(1) The appropriate Federal banking agency shall provide 
        the Commission upon request the results of any examination, 
        reports, records, or other information as each may have access 
        to with respect to the investment advisory activities of any 
        financial services holding company, bank, or separately 
        identifiable department or division of a bank, that is 
        registered under section 203 of this title, or, in the case of 
        a financial services holding company or bank, that has a 
        subsidiary or a separately identifiable department or division 
        registered under that section, to the extent necessary for the 
        Commission to carry out its statutory responsibilities.
            ``(2) The Commission shall provide to the appropriate 
        Federal banking agency upon request the results of any 
        examination, reports, records, or other
         information with respect to the investment advisory activities 
of any financial services holding company, bank, or separately 
identifiable department or division of a bank, any of which is 
registered under section 203 of this title, to the extent necessary for 
the agency to carry out its statutory responsibilities.
    ``(b) Effect on Other Authority.--Nothing herein shall limit in any 
respect the authority of the appropriate Federal banking agency with 
respect to such financial services holding company, bank, or department 
or division under any provision of law.
    ``(c) Definition.--For purposes of this section, the term 
`appropriate Federal banking agency' shall have the same meaning as in 
section 3 of the Federal Deposit Insurance Act.''.

SEC. 222. TREATMENT OF BANK COMMON TRUST FUNDS.

    (a) Securities Act of 1933.--Section 3(a)(2) of the Securities Act 
of 1933 (15 U.S.C. 77c(a)(2)) is amended by striking ``or any interest 
or participation in any common trust fund or similar fund maintained by 
a bank exclusively for the collective investment and reinvestment of 
assets contributed thereto by such bank in its capacity as trustee, 
executor, administrator, or guardian'' and inserting ``or any interest 
or participation in any common trust fund or similar fund that is 
excluded from the definition of the term `investment company' under 
section 3(c)(3) of the Investment Company Act of 1940''.
    (b) Securities Exchange Act of 1934.--Section 3(a)(l2)(A)(iii) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(l2)(A)(iii)) is 
amended to read as follows:
                    ``(iii) any interest or participation in any common 
                trust fund or similar fund that is excluded from the 
                definition of the term `investment company' under 
                section 3(c)(3) of the Investment Company Act of 
                1940;''.
    (c) Investment Company Act of 1940.--Section 3(c)(3) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-3(c)(3)) is amended by 
inserting before the period the following: ``, if--
                    ``(A) such fund is employed by the bank solely as 
                an aid to the administration of trusts, estates, or 
                other accounts created and maintained for a fiduciary 
                purpose;
                    ``(B) except in connection with the ordinary 
                advertising of the bank's fiduciary services, interests 
                in such fund are not--
                            ``(i) advertised; or
                            ``(ii) offered for sale to the general 
                        public; and
                    ``(C) fees and expenses charged by such fund are 
                not in contravention of fiduciary principles 
                established under applicable Federal or State law''.
    (d) Tax Effect.--It is the sense of the Congress that the public 
interest would be furthered by enacting legislation to amend section 
584 of the Internal Revenue Code of 1986 by inserting after subsection 
(h) the following new subsection:
    ``(i) Conversion, Mergers, or Reorganization of Common Trust 
Funds.--Notwithstanding any other provision of the Internal Revenue 
Code, any transfer of all or substantially all of the assets of a 
common trust fund taxable under this section to a registered investment 
company taxable under subchapter M shall not result in a gain or loss 
to the participants in such common trust fund where the transfer is a 
result of a merger, conversion, reorganization, transfer, or other 
similar transaction or series of transactions.''.

SEC. 223. INVESTMENT ADVISERS PROHIBITED FROM HAVING CONTROLLING 
              INTEREST IN REGISTERED INVESTMENT COMPANY.

    Section 15 of the Investment Company Act of 1940 (15 U.S.C. 80a-15) 
is amended by adding at the end the following new subsection:
    ``(g) Controlling Interest in Investment Company Prohibited.--
            ``(1) In general.--If any investment adviser to a 
        registered investment company, or an affiliated person of that 
        investment adviser, holds a controlling interest in that 
        registered investment company in a trustee or fiduciary 
        capacity, such person shall--
                    ``(A) if it holds the shares in a trustee or 
                fiduciary capacity with respect to any employee benefit 
                plan subject to the Employee Retirement Income Security 
                Act of 1974, transfer the power to vote the shares of 
                the investment company through to another person acting 
                in a fiduciary capacity with respect to the plan who is 
                not an affiliated person of that investment adviser or 
                any affiliated person thereof; or
                    ``(B) if it holds the shares in a trustee or 
                fiduciary capacity with respect to any other person or 
                entity other than an employee benefit plan subject to 
                the Employee Retirement Income Security Act of 1974--
                            ``(i) transfer the power to vote the shares 
                        of the investment company through to--
                                    ``(I) the beneficial owners of the 
                                shares;
                                    ``(II) another person acting in a 
                                fiduciary capacity who is not an 
                                affiliated person of that investment 
                                adviser or any affiliated person 
                                thereof; or
                                    ``(III) any person authorized to 
                                receive statements and information with 
                                respect to the trust who is not an 
                                affiliated person of that investment 
                                adviser or any affiliated person 
                                thereof;
                            ``(ii) vote the shares of the investment 
                        company held by it in the same proportion as 
                        shares held by all other shareholders of the 
                        investment company; or
                            ``(iii) vote the shares of the investment 
                        company as otherwise permitted under such 
                        rules, regulations, or orders as the Commission 
                        may prescribe for the protection of investors.
            ``(2) Exemption.--Paragraph (1) shall not apply to any 
        investment adviser to a registered investment company, or an 
        affiliated person of that investment adviser, holding shares of 
        the investment company in a trustee or fiduciary capacity if 
        that registered investment company consists solely of assets 
        held in such capacities.
            ``(3) Safe harbor.--No investment adviser to a registered 
        investment company or any affiliated person of such investment 
        adviser shall be deemed to have acted unlawfully or to have 
        breached a fiduciary duty under State or Federal law solely by 
        reason of acting in accordance with clause (i), (ii), or (iii) 
        of paragraph (1)(B).
            ``(4) Church plan exemption.--Paragraph (1) shall not apply 
        to any investment adviser to a registered investment company, 
        or an affiliated person of that investment adviser, holding 
        shares in such a capacity, if such investment adviser or such 
        affiliated person is an organization described in section 
        414(e)(3)(A) of the Internal Revenue Code of 1986.''.

SEC. 224. CONFORMING CHANGE IN DEFINITION.

    Section 2(a)(5) of the Investment Company Act of 1940 (15 U.S.C. 
80a-2(a)(5)) is amended by striking ``(A) a banking institution 
organized under the laws of the United States'' and inserting ``(A) a 
depository institution (as defined in section 3 of the Federal Deposit 
Insurance Act) or a branch or agency of a foreign bank (as such terms 
are defined in section 101(b) of the International Banking Act of 
1978)''.

SEC. 225. EFFECTIVE DATE.

    This subtitle shall take effect 270 days after the date of the 
enactment of this Act.
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