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[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 823 Introduced in House (IH)]

106th CONGRESS
  1st Session
                                H. R. 823

       To modernize and improve the financial services industry.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           February 24, 1999

  Mr. Baker 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

_______________________________________________________________________

                                 A BILL

 
       To modernize and improve the financial services industry.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Financial Services Competitive 
Enhancement Act''.

          TITLE I--FINANCIAL SERVICES COMPETITIVE ENHANCEMENT

SEC. 101. ANTI-AFFILIATION PROVISIONS OF ``GLASS-STEAGALL ACT'' 
              REPEALED.

    (a) Section 20 Repealed.--Section 20 of the Banking Act of 1933 (12 
U.S.C. 377) is repealed.
    (b) Section 32 Repealed.--Section 32 of the Banking Act of 1933 (12 
U.S.C. 78) is repealed.

SEC. 102. FINANCIAL ACTIVITIES.

    Section 4(c)(8) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(c)(8)) is amended to read as follows:
            ``(8) shares of any company the activities of which the 
        Board, in accordance with subsection (l) has determined (by 
        regulation or order) to be financial in nature or incidental to 
        such financial activities and--
                    ``(A) effective 90 days after the date of the 
                enactment of the Financial Services Competitive 
                Equality Act, it shall be financial in nature to 
                provide insurance as principal, agent, or broker in any 
                State, in full compliance with the laws and regulations 
                of such State that uniformly apply to each type of 
                insurance license or authorization in such State, 
                except that in no event shall the company, the bank 
                holding company, or any affiliate of the company or 
                bank holding company be subject to any State law or 
                regulation that restricts a bank from having an 
                affiliate, agent, or employee in such State licensed to 
                provide insurance as principal, agent, or broker; and
                    ``(B) the Board shall prescribe regulations 
                concerning insurance affiliations that provide 
                equivalent treatment for all stock and mutual insurance 
                companies that control or are otherwise affiliated with 
                a bank and fully accommodate and are consistent with 
                State law;''.

SEC. 103. INSURANCE COMPANY INVESTMENTS.

    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) Insurance Company Investments.--Notwithstanding subsection 
(a), a bank holding company may directly or indirectly acquire or 
control, whether as principal, on behalf of 1 or more entities 
(including any subsidiary of the holding company which is not a 
depository institution or subsidiary of a depository institution) 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 any activity not authorized pursuant to this section 
if--
            ``(1) the shares, assets, or ownership interests are not 
        acquired or held by a depository institution or a subsidiary of 
        a depository institution;
            ``(2) such shares, assets, or ownership interests are 
        acquired and held by an insurance company that is predominately 
        engaged in underwriting life, accident and health, or property 
        and casualty insurance (other than credit-related insurance);
            ``(3) such shares, assets, or ownership interests represent 
        an investment made in the ordinary course of business of such 
        insurance company in accordance with relevant State law 
        governing such investments; and
            ``(4) during the period such shares, assets, or ownership 
        interests are held, the bank holding company does not directly 
        or indirectly participate in the day-to-day management or 
        operation of the company or entity except insofar as necessary 
        to achieve the objectives of paragraph (3).''.

SEC. 104. FINANCIAL IN NATURE.

    Section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843) 
is amended by inserting after subsection (k) (as added by section 4 of 
this Act) the following new subsection:
    ``(l) Engaging in Activities Financial in Nature.--
            ``(1) In general.--Notwithstanding section 4(a), a bank 
        holding company may engage in any activity which the Board has 
        determined (by regulation or order) to be financial in nature 
        or incidental to such financial activities.
            ``(2) Factors to be considered.--In determining whether an 
        activity is financial in nature or incidental to financial 
        activities, the Board shall take into account--
                    ``(A) the purposes of this Act and the Financial 
                Services Competitive Enhancement Act;
                    ``(B) changes or reasonably expected changes in the 
                marketplace in which the bank holding companies 
                compete;
                    ``(C) changes or reasonably expected changes in the 
                technology for delivering financial services; and
                    ``(D) whether such activity is necessary or 
                appropriate to allow a bank holding company and the 
                affiliates of a bank holding company to--
                            ``(i) compete effectively with any company 
                        seeking to provide financial services in the 
                        United States;
                            ``(ii) use any available or emerging 
                        technological means, including any application 
                        necessary to protect the security or efficacy 
                        of systems for the transmission of data or 
                        financial transactions, in providing financial 
                        services; and
                            ``(iii) offer customers any available or 
                        emerging technological means for using 
                        financial services.
            ``(3) Activities that are financial in nature.--The 
        following activities shall be considered to be financial in 
        nature:
                    ``(A) Lending, exchanging, transferring, investing 
                for others, or safeguarding money or securities.
                    ``(B) Insuring, guaranteeing, or indemnifying 
                against loss, harm, damage, illness, disability, or 
                death, or providing and issuing annuities, and acting 
                as principal, agent, or broker for purposes of the 
                foregoing.
                    ``(C) Providing financial, investment, or economic 
                advisory services, including advising an investment 
                company (as defined in section 3 of the Investment 
                Company Act of 1940).
                    ``(D) Issuing or selling instruments representing 
                interests in pools of assets permissible for a bank to 
                hold directly.
                    ``(E) Underwriting, dealing, or making a market in 
                securities.
                    ``(F) Engaging in any activity that the Board has 
                determined, by order or regulation that is in effect on 
                the date of enactment of the Financial Services 
                Competitive Enhancement Act, to be so closely related 
                to banking or managing or controlling banks as to be a 
                proper incident thereto (subject to the same terms and 
                conditions contained in such order or regulation, 
                unless modified by the Board).
                    ``(G) Engaging, in the United States, in any 
                activity that--
                            ``(i) a bank holding company may engage in 
                        outside the United States; and
                            ``(ii) the Board has determined, under 
                        regulations issued pursuant to section 4(c)(13) 
                        of this Act (as in effect on the day before the 
                        date of enactment of the Financial Services 
                        Competitive Enhancement Act) to be usual in 
                        connection with the transaction of banking or 
                        other financial operations abroad.
                    ``(H) Directly or indirectly acquiring or 
                controlling, 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 bank 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 any 
                activity not authorized pursuant to this section if--
                            ``(i) the shares, assets, or ownership 
                        interests are not acquired or held by a 
                        depository institution or subsidiary of a 
                        depository institution;
                            ``(ii) such shares, assets, or ownership 
                        interests are acquired and held by a securities 
                        affiliate or an affiliate thereof as part of a 
                        bona fide underwriting or merchant banking 
                        activity, including investment activities 
                        engaged in for the purpose of appreciation and 
                        ultimate resale or disposition of the 
                        investment;
                            ``(iii) such shares, assets, or ownership 
                        interests, are held for such a period of time 
                        as will permit the sale or disposition thereof 
                        on reasonable basis consistent with the nature 
                        of the activities described in clause (ii); and
                            ``(iv) during the period such shares, 
                        assets, or ownership interests are held, the 
                        bank holding company does not actively 
                        participate in the day to day management or 
                        operation of such company or entity, except 
                        insofar as necessary to achieve the objectives 
                        of clause (ii).
            ``(4) Actions required.--The Board shall, by regulation or 
        order, define, consistent with the purposes of this Act, the 
        following activities as, and the extent to which such 
        activities are, financial in nature or incidental to activities 
        which are financial in nature:
                    ``(A) Lending, exchanging, transferring, investing 
                for others, or safeguarding financial assets other than 
                money or securities.
                    ``(B) Providing any device or other instrumentality 
                for transferring money or other financial assets;
                    ``(C) Arranging, effecting, or facilitating 
                financial transactions for the account of third 
                parties.
            ``(5) Post consummation notification.--
                    ``(A) In general.--A bank holding company that 
                acquires any company, or commences any activity, 
                pursuant to this subsection shall provide written 
                notice to the Board describing the activity commenced 
                or conducted by the company acquired no later than 30 
                calendar days after commencing the activity or 
                consummating the acquisition.
                    ``(B) Approval not required for certain financial 
                activities.--Except as provided in section 4(j) with 
                regard to the acquisition of a savings association, a 
                bank holding company may commence any activity, or 
                acquire any company, pursuant to paragraph (3) or any 
                regulation prescribed or order issued under paragraph 
                (4), without prior approval of the Board.

SEC. 105. STREAMLINING BANK HOLDING COMPANY SUPERVISION.

    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) Reports.--
                    ``(A) In general.--The Board from time to time may 
                require any bank holding company and any subsidiary of 
                such company to submit reports under oath to keep the 
                Board informed as to--
                            ``(i) its financial condition, systems for 
                        monitoring and controlling financial and 
                        operating risks, and transactions with 
                        depository institution subsidiaries of the 
                        holding company; and
                            ``(ii) compliance by the company or 
                        subsidiary with applicable provisions of 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 bank 
                        holding company or any subsidiary of such 
                        company has provided or been required to 
                        provide to other Federal and State supervisors 
                        or to appropriate self-regulatory 
                        organizations.
                            ``(ii) Availability.--A bank 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).
                            ``(iii) Required use of publicly reported 
                        information.--The Board shall, to the fullest 
                        extent possible, accept in fulfillment of any 
                        reporting or recordkeeping requirements under 
                        this Act information that is otherwise required 
                        to be reported publicly and externally audited 
                        financial statements.
                            ``(iv) Reports filed with other agencies.--
                        In the event the Board requires a report from a 
                        functionally regulated nondepository 
                        institution subsidiary of a bank holding 
                        company of a kind that is not required by 
                        another Federal or State regulator or 
                        appropriate self-regulatory organization, the 
                        Board shall request that the appropriate 
                        regulator or self-regulatory organization 
                        obtain such report. If the report is not made 
                        available to the Board, and the report is 
                        necessary to assess a material risk to the bank 
                        holding company or its subsidiary depository 
                        institution or compliance with this Act, the 
                        Board may require such subsidiary to provide 
                        such a report to the Board.
                    ``(C) Definition.--For purposes of this subsection, 
                the term `functionally regulated nondepository 
                institution' means--
                            ``(i) a broker or dealer registered under 
                        the Securities Exchange Act of 1934;
                            ``(ii) an investment adviser registered 
                        under the Investment Advisers Act of 1940, with 
                        respect to the investment advisory activities 
                        of such investment adviser and activities 
                        incidental to such investment advisory 
                        activities;
                            ``(iii) an insurance company subject to 
                        supervision by a State insurance commission, 
                        agency, or similar authority; and
                            ``(iv) an entity subject to regulation by 
                        the Commodity Futures Trading Commission, with 
                        respect to the commodities activities of such 
                        entity and activities incidental to such 
                        commodities activities.
            ``(2) Examinations.--
                    ``(A) Examination authority.--
                            ``(i) In general.--The Board may make 
                        examinations of each bank holding company and 
                        each subsidiary of a bank holding company.
                            ``(ii) Functionally regulated nondepository 
                        institution subsidiaries.--Notwithstanding 
                        clause (i), the Board may make examinations of 
                        a functionally regulated nondepository 
                        institution subsidiary of a bank holding 
                        company only if--
                                    ``(I) the Board has reasonable 
                                cause to believe that such subsidiary 
                                is engaged in activities that pose a 
                                material risk to an affiliated 
                                depository institution, or
                                    ``(II) based on reports and other 
                                available information, the Board has 
                                reasonable cause to believe that a 
                                subsidiary is not in compliance with 
                                this Act or with provisions relating to 
                                transactions with an affiliated 
                                depository institution and the Board 
                                cannot make such determination through 
                                examination of the affiliated 
                                depository institution or bank holding 
                                company.
                    ``(B) Limitations on examination authority for bank 
                holding companies and subsidiaries.--Subject to 
                subparagraph (A)(ii), the Board may make examinations 
                under subparagraph (A)(i) of each bank holding company 
                and each subsidiary of such holding company in order 
                to--
                            ``(i) inform the Board of the nature of the 
                        operations and financial condition of the 
                        holding company and such subsidiaries;
                            ``(ii) inform the Board of--
                                    ``(I) the financial and operational 
                                risks within the holding company system 
                                that may pose a threat to the safety 
                                and soundness of any subsidiary 
                                depository institution of such holding 
                                company; and
                                    ``(II) the systems for monitoring 
                                and controlling such risks; and
                            ``(iii) monitor compliance with the 
                        provisions of this Act and those governing 
                        transactions and relationships between any 
                        subsidiary depository institution and its 
                        affiliates.
                    ``(C) Restricted focus of examinations.--The Board 
                shall, to the fullest extent possible, limit the focus 
                and scope of any examination of a bank holding company 
                to--
                            ``(i) the bank holding company; and
                            ``(ii) any subsidiary of the holding 
                        company that, because of--
                                    ``(I) the size, condition, or 
                                activities of the subsidiary; or
                                    ``(II) the nature or size of 
                                transactions between such subsidiary 
                                and any depository institution which is 
                                also a subsidiary of such holding 
                                company,
                        could have a materially adverse effect on the 
                        safety and soundness of any depository 
                        institution affiliate of the holding company.
                    ``(D) Deference to bank examinations.--The Board 
                shall, to the fullest extent possible, use for the 
                purposes of this paragraph, the reports of examinations 
                of depository institutions made by the appropriate 
                Federal and State depository institution supervisory 
                authority.
                    ``(E) Deference to other examinations.--The Board 
                shall, to the fullest extent possible, address the 
                circumstances which might otherwise permit or require 
                an examination by the Board by forgoing an examination 
                and instead reviewing the reports of examination made 
                of--
                            ``(i) any registered broker or dealer or 
                        registered investment adviser by or on behalf 
                        of the Securities and Exchange Commission;
                            ``(ii) any licensed insurance company by or 
                        on behalf of any state regulatory authority 
                        responsible for the supervision of insurance 
                        companies; and
                            ``(iii) any other subsidiary that the Board 
                        finds to be comprehensively supervised by a 
                        Federal or State authority.
            ``(3) Capital.--
                    ``(A) In general.--The Board shall not, by 
                regulation, guideline, order or otherwise prescribe or 
                impose any capital or capital adequacy rules, 
                guidelines, standards, or requirements on any 
                subsidiary of a bank holding company that is not a 
                depository institution and--
                            ``(i) is in compliance with applicable 
                        capital requirements of another Federal 
                        regulatory authority (including the Securities 
                        and Exchange Commission) or State insurance 
                        authority; or
                            ``(ii) is registered as an investment 
                        adviser under the Investment Advisers Act of 
                        1940.
                    ``(B) Rule of construction.--Subparagraph (A) shall 
                not be construed as preventing the Board from imposing 
                capital or capital adequacy rules, guidelines, 
                standards, or requirements with respect to activities 
                of a registered investment adviser other than 
                investment advisory activities or activities incidental 
                to investment advisory activities.
            ``(4) Transfer of board authority to appropriate federal 
        banking agency.--
                    ``(A) In general.--In the case of any bank holding 
                company which is not significantly engaged in 
                nonbanking activities, the Board, in consultation with 
                the appropriate Federal banking agency, may designate 
                the appropriate Federal banking agency of the lead 
                insured depository institution subsidiary of such 
                holding company as the appropriate Federal banking 
                agency for the bank holding company.
                    ``(B) Authority transferred.--An agency designated 
                by the Board under subparagraph (A) shall have the same 
                authority as the Board under this Act to--
                            ``(i) examine and require reports from the 
                        bank holding company and any affiliate of such 
                        company (other than a depository institution) 
                        under section 5;
                            ``(ii) approve or disapprove applications 
                        or transactions under section 3;
                            ``(iii) take actions and impose penalties 
                        under subsections (e) and (f) of section 5 and 
                        section 8; and
                            ``(iv) take actions regarding the holding 
                        company, any affiliate of the holding company 
                        (other than a depository institution), or any 
                        institution-affiliated party of such company or 
                        affiliate under the Federal Deposit Insurance 
                        Act and any other statute which the Board may 
                        designate.
                    ``(C) Agency orders.--Section 9 (of this Act) and 
                section 105 of the Bank Holding Company Act Amendments 
                of 1970 shall apply to orders issued by an agency 
                designated under subparagraph (A) in the same manner 
                such sections apply to orders issued by the Board.
            ``(5) Functional regulation of securities and insurance 
        activities.--The Board shall defer to--
                    ``(A) the Securities and Exchange Commission with 
                regard to all interpretations of, and the enforcement 
                of, applicable Federal securities laws relating to the 
                activities, conduct, and operations of registered 
                brokers, dealers, investment advisers, and investment 
                companies; and
                    ``(B) the relevant State insurance authorities with 
                regard to all interpretations of, and the enforcement 
                of, applicable State insurance laws relating to the 
                activities, conduct, and operations of insurance 
                companies and insurance agents.''.

SEC. 106. AMENDMENT TO DIVESTITURE PROCEDURES.

    Section 5(e)(1) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1844(e)(1)) is amended--
            (1) by striking ``Financial Institutions Supervisory Act of 
        1966, order'' and inserting ``Financial Institutions 
        Supervisory Act of 1966, at the election of the bank holding 
        company--
                    ``(A) order''; and
            (2) by striking ``shareholders of the bank holding company. 
        Such distribution'' and inserting ``shareholders of the bank 
        holding company; or
                    ``(B) order the bank holding company, after due 
                notice and opportunity for hearing, and after 
                consultation with the bank's primary supervisor, which 
                shall be the Comptroller of the Currency in the case of 
                a national bank and the Federal Deposit Insurance 
                Corporation and the appropriate State supervisor in the 
                case of an insured nonmember bank, to terminate (within 
                120 days or such longer period as the Board may direct) 
                the ownership or control of any such bank by such 
                company.
        ``The distribution referred to in subparagraph (A)''.

SEC. 107. AUTHORITY OF STATE INSURANCE REGULATOR AND SECURITIES AND 
              EXCHANGE COMMISSION.

    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) Authority of State Insurance Regulator and the Securities and 
Exchange Commission.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, any regulation, order, or other action of the Board which 
        requires a bank holding company to provide funds or other 
        assets to a subsidiary insured depository institution shall not 
        be effective nor enforceable if--
                    ``(A) such funds or assets are to be provided by--
                            ``(i) a bank holding company that is an 
                        insurance company or is a broker or dealer 
                        registered under the Securities Exchange Act of 
                        1934; or
                            ``(ii) an affiliate of the depository 
                        institution which is an insurance company or a 
                        broker or dealer registered under such Act; and
                    ``(B) the State insurance authority for the 
                insurance company or the Securities and Exchange 
                Commission for the registered broker or dealer, as the 
                case may be, determines in writing sent to the holding 
                company and the Board that the holding company shall 
                not provide such funds or assets because such action 
                would have a material adverse effect on the financial 
                condition of the insurance company or the broker or 
                dealer, as the case may be.
            ``(2) Notice to state insurance authority of sec 
        required.--If the Board requires a bank holding company, or an 
        affiliate of a bank holding company, which is an insurance 
        company or a broker or dealer described in paragraph (1)(A) to 
        provide funds or assets to an insured depository institution 
        subsidiary of the holding company pursuant to any regulation, 
        order, or other action of the Board referred to in paragraph 
        (1), the Board shall promptly notify the State insurance 
        authority for the insurance company or the Securities and 
        Exchange Commission, as the case may be, of such requirement.
            ``(3) Divestiture in lieu of other action.--If the Board 
        receives a notice described in paragraph (1)(B) from a State 
        insurance authority or the Securities and Exchange Commission 
        with regard to a bank holding company or affiliate referred to 
        in such paragraph, the Board may order the bank holding company 
        to divest the insured depository institution within 180 days of 
        receiving notice or such longer period as the Board determines 
        consistent with the safe and sound operation of the insured 
        depository institution.
            ``(4) Conditions before divestiture.--During the period 
        beginning on the date an order to divest is issued by the Board 
        under paragraph (3) to a bank holding company and ending on the 
        date the divestiture is completed, the Board may impose any 
        conditions or restrictions on the holding company's ownership 
        or operation of the insured depository institution, including 
        restricting or prohibiting transactions between the insured 
        depository institution and any affiliate of the institution, as 
        are appropriate under the circumstances.''.

SEC. 108. PRUDENTIAL SAFEGUARDS.

    Section 5 of the Bank Holding Company Act of 1956 (12 U.S.C. 1844) 
is amended by inserting after subsection (g) (as added by section 8 of 
this Act) the following new subsection:
    ``(h) Prudential Safeguards.--
            ``(1) In general.--The Board may, by regulation or order, 
        impose restrictions or requirements on relationships or 
        transactions between a depository institution subsidiary of a 
        bank holding company and any affiliate of such depository 
        institution (other than a subsidiary of such institution) which 
        the Board finds is consistent with the public interest, the 
        purposes of this Act, the Financial Services Competitive 
        Enhancement Act, the Federal Reserve Act, and other Federal law 
        applicable to depository institution subsidiaries of bank 
        holding companies and the standards in paragraph (2).
            ``(2) Standards.--The Board may exercise authority under 
        paragraph (1) if the Board finds that such action will have any 
        of the following effects:
                    ``(A) Avoid any significant risk to the safety and 
                soundness of depository institutions or any Federal 
                deposit insurance fund.
                    ``(B) Enhance the financial stability of bank 
                holding companies.
                    ``(C) Avoid conflicts of interest or other abuses.
                    ``(D) Enhance the privacy of customers of 
                depository institutions.
                    ``(E) Promote the application of national treatment 
                and equality of competitive opportunity between nonbank 
                affiliates owned or controlled by domestic bank holding 
                companies and nonbank affiliates owned or controlled by 
                foreign banks operating in the United States.
            ``(3) Review.--The Board shall regularly--
                    ``(A) review all restrictions or requirements 
                established pursuant to paragraph (1) to determine 
                whether there is a continuing need for any such 
                restriction or requirement to carry out the purposes of 
                the Act, including any purpose described in paragraph 
                (2); and
                    ``(B) modify or eliminate any restriction or 
                requirement the Board finds is no longer required for 
                such purposes.''.

SEC. 109. EXAMINATION OF INVESTMENT COMPANIES.

    (a) Exclusive Commission Authority.--
            (1) In general.--The Commission shall be the sole agency 
        with authority to inspect and examine any registered investment 
        company that is not a bank holding company.
            (2) Prohibition on banking agencies.--A Federal banking 
        agency may not inspect or examine any registered investment 
        company that is not a bank holding company.
    (b) Examination Results and Other Information.--The Commission 
shall provide to any Federal banking agency, upon request, the results 
of any examination, reports, records, or other information with respect 
to any registered investment company to the extent necessary for the 
agency to carry out its statutory responsibilities.
    (c) Definition.--For purposes of this section, the following 
definitions shall apply:
            (1) Bank holding company.--The term ``bank holding 
        company'' has the meaning given to such term in section 2 of 
        the Bank Holding Company Act of 1956.
            (2) Commission.--The term ``Commission'' means the 
        Securities and Exchange Commission.
            (3) Federal banking agency.--The term ``Federal banking 
        agency'' has the meaning given to such term in section 3(z) of 
        the Federal Deposit Insurance Act.
            (4) Registered investment company.--The term ``registered 
        investment company'' means an investment company which is 
        registered with the Commission under the Investment Company Act 
        of 1940.

SEC. 110. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY, AND 
              ENFORCEMENT AUTHORITY OF THE BOARD.

    The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is 
amended by inserting after section 10 the following new section:

``SEC. 10A. LIMITATION ON RULEMAKING, PRUDENTIAL, SUPERVISORY, AND 
              ENFORCEMENT AUTHORITY OF THE BOARD.

    ``(a) Limitation on Direct Action.--
            ``(1) In general.--The Board may not prescribe regulations, 
        issue or seek entry of orders, impose restraints, restrictions, 
        guidelines, requirements, safeguards, or standards, or 
        otherwise take any action under or pursuant to any provisions 
        of this Act or section 8 of the Federal Deposit Insurance Act 
        against or with respect to a regulated subsidiary of a bank 
        holding company unless the action is necessary to prevent or 
        redress an unsafe or unsound practice or breach of fiduciary 
        duty by such subsidiary that poses a material risk to--
                    ``(A) the financial safety, soundness, or stability 
                of an affiliated depository institution; or
                    ``(B) the domestic or international payment system.
            ``(2) Criteria for board action.--The Board shall not take 
        action otherwise permitted under paragraph (1) unless the Board 
        finds that it is not reasonably possible to effectively protect 
        against the material risk at issue through action directed at 
        or against the affiliated depository institution or against 
        depository institutions generally.
    ``(b) Limitation on Indirect Action.--The Board may not prescribe 
regulations, issue or seek entry of orders, impose restraints, 
restrictions, guidelines, requirements, safeguards, or standards, or 
otherwise take any action under or pursuant to any provision of this 
Act or section 8 of the Federal Deposit Insurance Act against or with 
respect to a bank holding company where the purpose or effect of doing 
so would be to take action indirectly against or with respect to a 
regulated subsidiary that may not be taken directly against or with 
respect to such subsidiary in accordance with subsection (a).
    ``(c) Actions Specifically Authorized.--Notwithstanding subsection 
(a), the Board may take action under this Act or section 8 of the 
Federal Deposit Insurance Act to enforce compliance by a regulated 
subsidiary with Federal law that the Board has specific jurisdiction to 
enforce against each subsidiary.
    ``(d) Regulated Subsidiary Defined.--For purposes of this section, 
the term `regulated subsidiary' means any company that is not a bank 
holding company and is--
            ``(1) a broker or dealer registered under the Securities 
        Exchange Act of 1934;
            ``(2) an investment adviser registered under the Investment 
        Advisers Act of 1940, with respect to the investment advisory 
        activities of such investment adviser and activities incidental 
        to such investment advisory activities;
            ``(3) an investment company registered under the Investment 
        Company Act of 1940;
            ``(4) an insurance company or an insurance agency subject 
        to supervision by a State insurance commission, agency, or 
        similar authority; or
            ``(5) an entity subject to regulation by the Commodity 
        Futures Trading Commission, with respect to the commodities 
        activities of such entity and activities incidental to such 
        commodities activities.''.
                                 <all>
```