I

103D CONGRESS

1ST SESSION H. R. 458

To permit national banks, State member banks, and bank holding companies

to establish subsidiaries which underwrite shares of and sponsor investment companies, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 6, 1993

Mr. HOAGLAND introduced the following bill; which was referred to the

Committee on Banking, Finance and Urban Affairs

A BILL

To permit national banks, State member banks, and bank

holding companies to establish subsidiaries which underwrite shares of and sponsor investment companies, and

for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Financial Services Act

5 of 1993’’.
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1 SEC. 2. AUTHORIZATION FOR A SUBSIDIARY OF A NA2 TIONAL BANK TO UNDERWRITE SHARES OF

3 AND SPONSOR INVESTMENT COMPANIES.

4 Section 5136 of the Revised Statutes of the United

5 States (12 U.S.C. 24) is amended by adding at the end

6 the following new paragraph:

7 ‘‘(11) MUTUAL FUNDS.—

8 ‘‘(A) IN GENERAL.—Notwithstanding the

9 restrictions and limitations in the paragraph

10 designated ‘Seventh’, to engage in the business

11 of dealing in, underwriting, and distributing the

12 shares of any investment company (as defined

13 in section 3 of the Investment Company Act of

14 1940) and to organize, sponsor, manage, or

15 control such an investment company if such ac16 tivities are conducted through a nonbank sub17 sidiary of the bank.

18 ‘‘(B) COORDINATION WITH OTHER PROVI19 SIONS.—The activities authorized by this para20 graph are in addition to any other activity in

21 which a national bank may engage directly pur22 suant to another provision of law, or as other23 wise authorized by the Comptroller of the Cur24 rency, and this paragraph shall not be con25 strued as prohibiting a national bank from en26 gaging in such other activity directly.
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1 ‘‘(C) SUBSIDIARY DEFINED.—For pur2 poses of this paragraph, the term ‘subsidiary’

3 means a corporation more than 25 percent of

4 the voting stock of which is owned by a national

5 bank. Such a corporation may be a subsidiary

6 of more than 1 national bank.’’.

7 SEC. 3. AUTHORIZATION FOR A SUBSIDIARY OF A STATE

8 MEMBER BANK TO UNDERWRITE SHARES OF

9 AND SPONSOR INVESTMENT COMPANIES.

10 The 20th undesignated paragraph of section 9 of the

11 Federal Reserve Act (12 U.S.C. 335) is amended by in12 serting before the period at the end the following: ‘‘, and

13 to the same exception to such limitations and conditions

14 as is applicable to national banks under paragraph (11)

15 of such section’’.

16 SEC. 4. DISCLOSURE REQUIREMENTS APPLICABLE TO SUB17 SIDIARIES OF NATIONAL AND STATE MEM18 BER BANKS.

19 The Federal Reserve Act is amended by inserting

20 after section 9A of the Federal Reserve Act (12 U.S.C.

21 339) the following new section:

22 ‘‘SEC. 9B. DISCLOSURE REQUIREMENTS.

23 ‘‘(a) IN GENERAL.—If a nonbank subsidiary of a na24 tional bank or State member bank engages in activities

25 pursuant to section 5136(11) of the Revised Statutes of
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1 the United States or the 20th undesignated paragraph of

2 section 9 of this Act, the subsidiary shall—

3 ‘‘(1) provide a 1-time written disclosure to each

4 customer that—

5 ‘‘(A) the subsidiary is not an insured de6 pository institution;

7 ‘‘(B) the subsidiary is a separate corporate

8 entity from any insured depository institution

9 which is an affiliate of the subsidiary; and

10 ‘‘(C) any product sold, offered, or rec11 ommended by the subsidiary is not insured by

12 the Federal Deposit Insurance Corporation, is

13 not guaranteed by an insured depository insti14 tution, and is not otherwise an obligation of an

15 insured depository institution; and

16 ‘‘(2) obtain a 1-time written acknowledgement

17 from each customer that the disclosures described in

18 paragraph (1) have been received.

19 ‘‘(b) REGULATION OF METHOD OF DISCLOSURES.—

20 Any disclosures under subsection (a) shall be made in ac21 cordance with such regulations as may be prescribed—

22 ‘‘(1) by the Comptroller of the Currency, in the

23 case of a subsidiary of a national bank; or

24 ‘‘(2) by the Board, in the case of a subsidiary

25 of a State member bank.
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1 ‘‘(c) EXCEPTIONS AND ADDITIONAL INFORMA2 TION.—The Comptroller of the Currency, in the case of

3 a subsidiary of a national bank, and the Board, in the

4 case of a subsidiary of a State member bank, may—

5 ‘‘(1) require additional information to be dis6 closed under subsection (a) by the subsidiary; and

7 ‘‘(2) grant any exception to the disclosure re8 quirement under subsection (a) which is consistent

9 with the purposes of such subsection.’’.

10 SEC. 5. AUTHORIZATION FOR A MEMBER BANK TO BE AF11 FILIATED WITH A COMPANY WHICH UNDER12 WRITES SHARES OF AND SPONSORS INVEST13 MENT COMPANIES.

14 The 1st sentence of section 20 of the Banking Act

15 of 1933 (12 U.S.C. 377) is amended by striking ‘‘securi16 ties: Provided, That nothing in this paragraph’’ and in17 serting ‘‘, except to the extent such affiliate is engaged

18 in activities in accordance with section 5136(11) of the

19 Revised Statutes of the United States, the 20th undesig20 nated paragraph of section 9 of the Federal Reserve Act,

21 or section 4(c)(15) of the Bank Holding Company Act of

22 1956. Nothing in this paragraph’’.
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1 SEC. 6. AUTHORIZATION FOR A MEMBER BANK AND AN AF2 FILIATE ENGAGED IN INVESTMENT COMPANY

3 ACTIVITIES TO HAVE MANAGEMENT INTER4 LOCKS.

5 Section 32 of the Banking Act of 1933 (12 U.S.C.

6 78) is amended—

7 (1) by inserting ‘‘(a) GENERAL PROHIBITION

8 AND EXCEPTION.—’’ before ‘‘No officer,’’; and

9 (2) by adding at the end the following new sub10 section:

11 ‘‘(b) EXCEPTION FOR AFFILIATES ENGAGED IN IN12 VESTMENT COMPANY ACTIVITIES.—Subsection (a) shall

13 not apply so as to prohibit an officer, director, or employee

14 of a nonbank subsidiary of a national bank, State member

15 bank, or bank holding company which is engaged in activi16 ties in accordance with section 5136(11) of the Revised

17 Statutes of the United States, the 20th undesignated

18 paragraph of section 9 of the Federal Reserve Act, or sec19 tion 4(c)(15) of the Bank Holding Company Act of 1956

20 from serving at the same time as an officer, director, or

21 employee of such bank, the bank holding company, a mem22 ber bank which is an affiliate of such bank, or an invest23 ment company that is organized, sponsored, managed, or

24 controlled by a subsidiary of such bank or holding com25 pany.’’.
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1 SEC. 7. AUTHORIZATION FOR A BANK HOLDING COMPANY

2 TO ESTABLISH A COMPANY WHICH UNDER3 WRITES SHARES OF AND SPONSORS INVEST4 MENT COMPANIES.

5 (a) IN GENERAL.—Section 4(c) of the Bank Holding

6 Company Act of 1956 (12 U.S.C. 1843(c)) is amended—

7 (1) by striking ‘‘or’’ at the end of paragraph

8 (13);

9 (2) by striking the period at the end of para10 graph (14)(H)(ii) and inserting ‘‘; or’’; and

11 (3) by inserting after paragraph (14)(H)(ii) the

12 following new paragraph:

13 ‘‘(15) shares of any company engaged in deal14 ing in, underwriting, or distributing the shares of

15 any investment company (as defined in section 3 of

16 the Investment Company Act of 1940), or organiz17 ing, sponsoring, managing, or controlling such in18 vestment company.’’.

19 (b) DISCLOSURE REQUIREMENTS.—Section 4 of the

20 Bank Holding Company Act of 1956 (12 U.S.C. 1843)

21 is amended by adding at the end the following new sub22 section:

23 ‘‘(j) DISCLOSURE REQUIREMENTS FOR SUBSECTION

24 (c)(15) ACTIVITIES.—
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1 ‘‘(1) IN GENERAL.—Any bank holding company

2 which controls a company described in subsection

3 (c)(15) shall require such company to—

4 ‘‘(A) provide a 1-time written disclosure to

5 each customer that—

6 ‘‘(i) the company is not an insured de7 pository institution;

8 ‘‘(ii) the company is a separate cor9 porate entity from any insured depository

10 institution which is an affiliate of the com11 pany; and

12 ‘‘(iii) any product sold, offered, or rec13 ommended by the company is not insured

14 by the Federal Deposit Insurance Corpora15 tion, is not guaranteed by an insured de16 pository institution, and is not otherwise

17 an obligation of an insured depository in18 stitution; and

19 ‘‘(B) obtain a 1-time written acknowledge20 ment from each customer that the disclosures

21 described in subparagraph (A) have been re22 ceived.

23 ‘‘(2) REGULATION OF METHOD OF DISCLO24 SURES.—Any disclosures under paragraph (1) shall
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1 be made in accordance with such regulations as the

2 Board may prescribe.

3 ‘‘(3) EXCEPTIONS AND ADDITIONAL INFORMA4 TION.—The Board may—

5 ‘‘(A) require additional information to be

6 disclosed by the company under paragraph (1);

7 and

8 ‘‘(B) grant any exception to the disclosure

9 requirement under paragraph (1) which is con10 sistent with the purposes of such subsection.’’.

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