I

104TH CONGRESS

2D SESSION H. R. 4182

To enhance competition in the financial services sector and merge the

commercial bank and savings association charters.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 25, 1996

Mrs. ROUKEMA (for herself, Mr. MCCOLLUM, Mr. VENTO, Mr. DREIER, Ms.

FURSE, Mr. FLAKE, Mr. KING, Mr. BONO, and Ms. MCKINNEY) 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

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; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Depository Institution Affiliation and Thrift Charter

6 Conversion Act’’.

7 (b) TABLE OF CONTENTS.—The table of contents for

8 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Findings and purposes.

TITLE I—FINANCIAL SERVICES HOLDING COMPANY ACT
2

HR 4182 IH

Sec. 101. Short title.

Subtitle A—General Provisions

Sec. 102. Definitions.

Sec. 103. Changes in control of depository institutions.

Sec. 104. Affiliate transactions.

Sec. 105. Capital requirements.

Sec. 106. Interstate acquisitions of insured banks.

Sec. 107. Differential treatment prohibition; laws inconsistent with this Act.

Sec. 108. Tying and insider lending provisions.

Sec. 109. Reports, examination and enforcement.

Sec. 110. Divestiture.

Sec. 111. Criminal penalties.

Sec. 112. Civil enforcement, cease-and-desist orders, civil money penalties, removal, and prohibition authority.

Sec. 113. Judicial review.

Sec. 114. National Financial Services Committee.

Subtitle B—Securities Activities of Financial Services Holding Companies

Sec. 121. Limitation on securities activities of depository institutions affiliated

with securities affiliates.

Sec. 122. Safeguards relating to securities affiliates.

Sec. 123. Joint standards relating to retail sales of certain nondeposit investment products.

Subtitle C—Insurance and Real Estate Development Activities of Financial

Services Holding Companies

Sec. 131. Limitation on insurance underwriting and real estate development activities of depository institutions.

Sec. 132. Acquisition of preexisting insurance agency by bank holding companies.

Sec. 133. Existing contracts.

TITLE II—CONFORMING AMENDMENTS TO OTHER LAWS FOR

FINANCIAL SERVICES HOLDING COMPANIES

Sec. 201. Exemption of financial services holding companies from the Bank

Holding Company Act of 1956.

Sec. 202. Amendment to the Federal Reserve Act.

Sec. 203. Amendments to the Banking Act of 1933.

Sec. 204. Amendments to the Federal Deposit Insurance Act.

Sec. 205. Amendment to the Community Reinvestment Act.

Sec. 206. Amendment to the Federal Power Act.

Sec. 207. Amendment to the Right to Financial Privacy Act.

Sec. 208. Amendments to the International Banking Act.

TITLE III—FUNCTIONAL REGULATION AMENDMENTS TO SECURITIES LAWS FOR FINANCIAL SERVICES HOLDING COMPANIES

Subtitle A—Broker Dealer Provisions

Sec. 301. Definition of broker.

Sec. 302. Definition of dealer.

Sec. 303. Power to exempt from the definitions of broker and dealer.

Sec. 304. Margin requirements.
3

HR 4182 IH

Subtitle B—Investment Company Provisions

Sec. 311. Custody of investment company assets by affiliated bank.

Sec. 312. Lending to an affiliated investment company.

Sec. 313. Independent directors.

Sec. 314. Additional SEC disclosure authority.

Sec. 315. Definition of broker under the Investment Company Act of 1940.

Sec. 316. Definition of dealer under the Investment Company Act of 1940.

Sec. 317. Removal of the exclusion from the definition of investment adviser for

banks that advise investment companies.

Sec. 318. Definition of broker under the Investment Advisors Act of 1940.

Sec. 319. Definition of dealer under the Investment Advisors Act of 1940.

Sec. 320. Interagency consultation.

Sec. 321. Treatment of bank common trust funds.

Sec. 322. Investment advisers prohibited from having controlling interest in

registered investment company.

Sec. 323. Conforming change in definition.

Sec. 324. Effective date.

TITLE IV—WHOLESALE FINANCIAL INSTITUTIONS OWNED BY

FINANCIAL SERVICES HOLDING COMPANIES

Sec. 401. National wholesale financial institutions.

Sec. 402. State member wholesale financial institutions.

Sec. 403. Amendments to the Federal Deposit Insurance Act.

TITLE V—MERGER OF BANK AND THRIFT CHARTERS,

REGULATORS, AND INSURANCE FUNDS

Subtitle A—Conversion of Thrift Charters

Sec. 501. Short title.

Sec. 502. Termination of Federal savings associations; treatment of State savings associations as banks for purposes of Federal banking law.

Sec. 503. Treatment of certain activities and affiliations of bank holding companies resulting from this Act.

Sec. 504. Transition provisions for activities of savings associations which convert into or become treated as banks.

Sec. 505. Registration of bank holding companies resulting from conversions of

savings associations to banks or treatment of savings associations as banks.

Sec. 506. Additional transition provisions and special rules.

Sec. 507. Technical and conforming amendments.

Sec. 508. References to savings associations and state banks in federal law.

Sec. 509. Repeal of Home Owners’ Loan Act.

Sec. 510. Definitions.

Subtitle B—Elimination of Office of Thrift Supervision

Sec. 511. Office of Thrift Supervision abolished.

Sec. 512. Determination of transferred functions and employees.

Sec. 513. Savings provisions.

Sec. 514. Cost of funds indexes.

Sec. 515. References in federal law to director of the Office of Thrift Supervision.

Sec. 516. Reconfiguration of board of directors of FDIC as a result of removal

of director of the Office of Thrift Supervision.
4

HR 4182 IH

Subtitle C—Merger of BIF and SAIF

Sec. 521. Amendment to Budget Reconciliation Act.

TITLE VI—NATIONAL MARKET FUNDED LENDING INSTITUTIONS

Sec. 601. National market funded lending institutions.

TITLE VII—EFFECTIVE DATE

Sec. 701. Effective date.

1 SECTION 2. FINDINGS AND PURPOSES.

2 (a) FINDINGS.—The Congress finds that—

3 (1) current laws and regulations restrain effi4 ciency, competition, and innovation in the design

5 and delivery of financial services to the disadvantage

6 of consumers;

7 (2) restrictions on ownership of depository insti8 tutions and affiliations with other business organiza9 tions interfere with their ability to attract and retain

10 capital and managerial resources;

11 (3) the vulnerability of the financial system and

12 its discrete components is increased and effective

13 monitoring, supervision, and coordination of actions

14 during periods of stress is impeded by fragmented

15 and disparate regulation;

16 (4) the thrift charter has become obsolete;

17 (5) market demand and safety and soundness

18 considerations warrant the creation of a new charter

19 for uninsured wholesale financial institutions; and

20 (6) current laws inhibit the ability of domestic

21 financial markets and intermediaries to respond to
5

HR 4182 IH

1 the serious competitive challenges presented by for2 eign intermediaries and the globalization of markets.

3 (b) PURPOSES.—The purposes of this Act are to pro4 mote the safety and soundness of the Nation’s financial

5 system, enhance the quality of regulation and supervision

6 of financial intermediaries, and achieve a more efficient

7 market and effective regulatory structure by—

8 (1) establishing an alternative and comprehen9 sive legislative framework for the creation and regu10 lation of financial services holding companies;

11 (2) enhancing the capital adequacy of commer12 cial banks, brokers and dealers, and other financial

13 companies by eliminating prohibitions on common

14 ownership and affiliation within a financial services

15 holding company;

16 (3) permitting affiliates to engage in regulated

17 activities subject to functional and equal regulation

18 by the appropriate Federal or State regulator;

19 (4) insulating and protecting insured depository

20 institutions through enhanced capital requirements,

21 expanded restrictions on relationships with affiliates,

22 broader examination and enforcement authority, and

23 increased civil and criminal penalties;

24 (5) permitting the efficient marketing and dis25 tribution of financial services to consumers subject
6

HR 4182 IH

1 to safeguards against coercive tie-ins and other un2 fair and abusive practices;

3 (6) establishing the National Financial Services

4 Committee to oversee the evolution and supervision

5 of the financial services industry and to report to the

6 Congress;

7 (7) eliminating the thrift charter and requiring

8 thrifts to convert to banks, subject to appropriate

9 transition provisions;

10 (8) merging the bank and thrift insurance

11 funds; and

12 (9) creating new State and Federal charters for

13 uninsured wholesale financial institutions.

14 TITLE I—FINANCIAL SERVICES HOLDING

15 COMPANY ACT

16 SEC. 101. SHORT TITLE.

17 This title may be cited as the ‘‘Financial Services

18 Holding Company Act’’.

19 Subtitle A—General Provisions

20 SEC. 102. DEFINITIONS.

21 For purposes of this Act, the following definitions

22 apply.

23 (a) FINANCIAL SERVICES HOLDING COMPANY.—The

24 term ‘‘financial services holding company’’ means a com25 pany that—
7

HR 4182 IH

1 (1) has filed with the National Financial Serv2 ices Committee a notice stating such company’s in3 tent to comply with the requirements of this Act and

4 has not withdrawn such notice;

5 (2) controls, acquires control of, or operates a

6 depository institution; and

7 (3) is predominantly a financial company.

8 (b) COMPANY.—The term ‘‘company’’ means any cor9 poration, partnership, business, trust, association, or simi10 lar organization, or any other trust unless by its terms

11 it must terminate within 25 years or not later than 21

12 years and 10 months after the death of individuals living

13 on the effective date of the trust, but shall not include

14 any corporation the majority of the shares of which are

15 owned by the United States or by any State.

16 (c) BANK HOLDING COMPANY.—The term ‘‘bank

17 holding company’’ has the same meaning as in section

18 2(a) of the Bank Holding Company Act of 1956.

19 (d) CONTROL.—Except as provided in section

20 107(e)(2), the term ‘‘control’’ means, directly or indi21 rectly, owns or has the power to vote 25 percent or more

22 of any class of voting securities of a company, or has the

23 power to elect a majority of the directors of a company,

24 except that—
8

HR 4182 IH

1 (1) no company shall be deemed to control or

2 to have acquired control of any other company by

3 virtue of its ownership of the voting securities of

4 such other company—

5 (A) acquired or held in an agency, trust, or

6 other fiduciary capacity, unless the company

7 has sole discretionary authority to exercise vot8 ing rights with respect thereto;

9 (B) acquired or held in connection with or

10 incidental to the underwriting of securities if

11 such securities are held only for such period of

12 time as will permit the sale thereof on a reason13 able basis; or

14 (C) acquired in securing or collecting a

15 debt previously contracted in good faith, until 2

16 years after the date of acquisition or for such

17 additional period of time as the appropriate

18 Federal banking agency may permit; and

19 (2) no company formed for the sole purpose of

20 participating in a proxy solicitation shall be deemed

21 to be in control of a company by virtue of its acqui22 sition of voting rights with respect to shares of such

23 company acquired in the course of such solicitation.

24 (e) AFFILIATE.—Except as provided in section

25 107(e)(1), the term ‘‘affiliate’’ of a company means any
9

HR 4182 IH

1 other company which controls, is controlled by, or is under

2 common control with such company.

3 (f) SUBSIDIARY.—The term ‘‘subsidiary’’ has the

4 same meaning as in section 2(d) of the Bank Holding

5 Company Act of 1956.

6 (g) DEPOSITORY INSTITUTION AND INSURED DEPOS7 ITORY INSTITUTION.—

8 (1) IN GENERAL.—The terms ‘‘depository insti9 tution’’ and ‘‘insured depository institution’’ have

10 the same meanings as in section 3 of the Federal

11 Deposit Insurance Act, except that the term ‘‘depos12 itory institution’’ also means—

13 (A) any wholesale financial institution; and

14 (B) any branch, agency, or commercial

15 lending company operated in the United States

16 by a foreign bank.

17 (2) EXCEPTION RELATED TO FOREIGN

18 BANKS.—Notwithstanding paragraph (1)(B), the

19 National Financial Services Committee may, for

20 purposes of any section or provision of this Act, ex21 empt from the definition of ‘‘depository institution’’

22 any branch, agency, or commercial lending company

23 operated in the United States by a foreign bank as

24 the Committee deems appropriate, provided that

25 such exemption is—
10

HR 4182 IH

1 (A) issued by regulation, and

2 (B) consistent with the principles of na3 tional treatment and equality of competitive op4 portunity.

5 (h) LEAD DEPOSITORY INSTITUTION.—The term

6 ‘‘lead depository institution’’ means the largest depository

7 institution controlled by the financial services holding

8 company, based on a comparison of the average total as9 sets controlled by each depository institution during the

10 previous 12-month period.

11 (i) WHOLESALE FINANCIAL INSTITUTION.—The

12 term ‘‘wholesale financial institution’’ means a national

13 wholesale financial institution described in section 5136B

14 of the Revised Statutes of the United States or a State

15 member wholesale financial institution described in section

16 9B of the Federal Reserve Act.

17 (j) FOREIGN BANK TERMS.—

18 (1) IN GENERAL.—The terms ‘‘agency’’,

19 ‘‘branch’’, ‘‘foreign bank’’, and ‘‘commercial lending

20 company’’ have the same meaning as in Section 1(b)

21 of the International Banking Act.

22 (2) COMMERCIAL LENDING COMPANY OPER23 ATED BY A FOREIGN BANK.—The term ‘‘commercial

24 lending company operated by a foreign bank’’ means
11

HR 4182 IH

1 a commercial lending company controlled by a for2 eign bank.

3 (3) BRANCH OR AGENCY OPERATED BY A FOR4 EIGN BANK.—A branch or agency operated by a for5 eign bank shall be deemed to be controlled by that

6 foreign bank.

7 (k) DOMESTIC BRANCH.—The term ‘‘domestic

8 branch’’ has the same meaning as in section 3(o) of the

9 Federal Deposit Insurance Act;

10 (l) PREDOMINANTLY A FINANCIAL COMPANY.

11 (1) IN GENERAL.—A company is ‘‘predomi12 nantly a financial company’’ if at least 75 percent

13 of its business (in the United States) is derived

14 from—

15 (A) financial service institutions controlled

16 by such company; or

17 (B) financial activities engaged in by such

18 company or any of its affiliates.

19 (2) FOREIGN BANK ALTERNATIVE.—As an al20 ternative to a paragraph (1), a foreign bank, and

21 any company of which a foreign bank is a subsidi22 ary, is ‘‘predominantly a financial company’’ if—

23 (A) all of the business of such foreign bank

24 and any such company (including the business
12

HR 4182 IH

1 of direct and indirect subsidiaries of the foreign

2 bank) in the United States is derived from—

3 (i) financial services institutions con4 trolled or operated by such foreign bank;

5 (ii) financial activities engaged in by

6 such foreign bank or any of its affiliates;

7 (iii) companies that, with respect to

8 that foreign bank, would meet the stand9 ard for investment under sections 2(h)(2)

10 or 4(c)(9) of the Bank Holding Company

11 Act of 1956 as if that foreign bank were

12 subject to that Act; or

13 (iv) activities that, with respect to

14 that foreign bank, would be permissible

15 under section 4(c)(9) of the Bank Holding

16 Company Act of 1956 if that foreign bank

17 were subject to that Act; and

18 (B) the amount of banking business con19 ducted outside the United States by such for20 eign bank and such company of which that for21 eign bank is a subsidiary satisfies the standard

22 described in section 2(h)(2) of the Bank Hold23 ing Company Act of 1956.

24 (3) RECIPROCAL NATIONAL TREATMENT.—
13

HR 4182 IH

1 (A) IN GENERAL.—A foreign bank that op2 erates a branch, agency or commercial lending

3 company in the United States, and any com4 pany that owns or controls such a foreign bank,

5 shall be eligible for the treatment afforded

6 under paragraph (1) and section 122(m) only if

7 the home country of such foreign bank or com8 pany accords to the United States banks the

9 same competitive opportunities in banking as

10 such country accords to domestic banks of such

11 country.

12 (B) COORDINATION WITH NAFTA.—Sub13 paragraph (A) shall not apply in derogation of

14 any obligation under the North American Free

15 Trade Agreement.

16 (C) HOME COUNTRY DEFINED.—For pur17 poses of subparagraph (A), the term ‘‘home

18 country’’ means, with respect to any foreign

19 bank or company referred to in subparagraph

20 (A), the country under the laws of which the

21 foreign bank or company is organized.

22 (4) INTERPRETIVE AUTHORITY.—The National

23 Financial Services Committee shall issue regulations

24 describing the method for calculating compliance

25 with the standard described in paragraphs (1) and
14

HR 4182 IH

1 (2), taking into account such factors as revenues

2 and assets, including assets under management.

3 (5) IMPLEMENTATION AND AUTHORITY.—The

4 appropriate Federal banking agency of the lead de5 pository institution of a financial services holding

6 company shall implement and enforce the regula7 tions prescribed pursuant to paragraph (4) with re8 spect to such holding company.

9 (m) FINANCIAL SERVICES INSTITUTION.—The term

10 ‘‘financial services institution’’ means—

11 (1) A depository institution;

12 (2) A broker or dealer (as defined in section 3

13 of the Securities Exchange Act of 1934);

14 (3) A futures commission merchant (as defined

15 in section 1(a)(12) of the Commodity Exchange

16 Act);

17 (4) An investment company (as defined in sec18 tion 3 of the Investment Company Act of 1940);

19 (5) An investment adviser (as defined in section

20 202(a)(11) of the Investment Act of 1940);

21 (6) An insurance company organized or licensed

22 under the law of any State, including a company

23 that only incurs liabilities under annuity contracts,

24 the income on which is tax deferred under Section

25 72 of the Internal Revenue Code of 1986;
15

HR 4182 IH

1 (7) A trust company organized under the laws

2 of the United States or the laws of any State; or

3 (8) A national market funded lending institu4 tion organized pursuant to section 5158 of the Re5 vised Statutes of the United States, as added by sec6 tion 601 of the Depository Institution Affiliation and

7 Thrift Charter Conversion Act;

8 (9) Any other type of company that is ‘‘engaged

9 in the business of providing financial services’’, as

10 determined by the National Financial Services Com11 mittee by rule, regulation, or order.

12 (n) FINANCIAL ACTIVITIES.—The term ‘‘financial ac13 tivities’’ means any of the following—

14 (1) receiving money subject to a deposit or

15 other repayment obligation;

16 (2) lending, exchanging, transferring or safe17 guarding money or other financial assets;

18 (3) providing any device or other instrumental19 ity for the transfer of money or other financial as20 sets;

21 (4) insuring, guaranteeing or indemnifying

22 against loss, harm, damage, illness, disability or

23 death;

24 (5) providing financial, investment or economic

25 advisory or information services, including advising
16

HR 4182 IH

1 an investment company (as defined in section 3 of

2 the Investment Company Act of 1940);

3 (6) directly or indirectly acquiring or control4 ling, whether as principal, on behalf of 1 or more en5 tities (including entities, other than a depository in6 stitution or subsidiary of a depository institution,

7 that the financial services holding company con8 trols), or otherwise, shares, assets, or ownership in9 terests (including without limitation debt or equity

10 securities, partnership interests, trust certificates, or

11 other instruments representing ownership) of a com12 pany or other entity, whether or not constituting

13 control of such company or entity, engaged in any

14 activity if—

15 (A) the shares, assets, or ownership inter16 ests are not acquired or held by a depository in17 stitution or a subsidiary of a depository institu18 tion;

19 (B) such shares, assets, or ownership in20 terests are acquired and held as part of a bona

21 fide underwriting, investment banking, or insur22 ance company investment activity, which in23 cludes investment activities engaged in for the

24 purpose of appreciation and ultimate resale or

25 other disposition of the investment, and such
17

HR 4182 IH

1 shares, assets, or ownership interest are held

2 for such a period of time as will permit the sale

3 or disposition thereof on a reasonable basis con4 sistent with the nature of such activities; and

5 (C) during the period such shares, assets,

6 or ownership interests are held, the financial

7 services holding company does not actively man8 age or operate the company or entity except in9 sofar as necessary to achieve the objectives of

10 subparagraph (B);

11 (7) arranging, effecting or facilitating financial

12 transactions for the account of third parties;

13 (8) underwriting, dealing in or making a mar14 ket in securities;

15 (9) engaging in any activity that is permissible

16 for a bank holding company pursuant to section

17 4(c)(8) of the Bank Holding Company Act of 1956

18 by rule, order or regulation;

19 (10) engaging in any activity (in the United

20 States) that is—

21 (A) permissible for a bank holding com22 pany to engage in outside the United States,

23 and

24 (B) considered a financial activity or bank25 ing or financial operation, pursuant to section
18

HR 4182 IH

1 4(c)(13) of the Bank Holding Company Act of

2 1956 or any rule, order, or regulation issued

3 thereunder;

4 (11) owning shares of any company that would

5 be permissible for a bank holding company to own

6 pursuant to sections 4(c)(6) and 4(c)(7) of the Bank

7 Holding Company Act of 1956;

8 (12) engaging in the functional equivalent of

9 any of the foregoing; or

10 (13) engaging in any activity that the National

11 Financial Services Committee determines by rule,

12 order, or regulation to be financial in nature or inci13 dental to such financial activities, taking into ac14 count—

15 (A) changes or reasonably expected

16 changes in the marketplace in which financial

17 services holding company compete;

18 (B) changes or reasonably expected

19 changes in the technology by which financial

20 services are delivered; or

21 (C) whether such activity is necessary or

22 appropriate to—

23 (i) allow a financial services holding

24 company and its affiliates to compete effec-
19

HR 4182 IH

1 tively against any company seeking to pro2 vide financial services in the United States;

3 (ii) use any available or emerging

4 technological means to provide financial

5 services; or

6 (iii) offer customers any available or

7 emerging technological means for using fi8 nancial services.

9 (o) APPROPRIATE FEDERAL BANKING AGENCY.—

10 The term ‘‘appropriate Federal banking agency’’ has the

11 same meaning as in section 3 of the Federal Deposit In12 surance Act.

13 (p) STATE.—The term ‘‘State’’ has the same mean14 ing as in section 3 of the Federal Deposit Insurance Act.

15 (q) CAPITAL TERMS.—

16 (1) IN GENERAL.—The terms ‘‘adequately cap17 italized’’ and ‘‘well capitalized’’ have the same mean18 ings as in—

19 (A) section 38(b)(1) of the Federal Deposit

20 Insurance Act with respect to an insured depos21 itory institution;

22 (B) section 9B(c)(2)(B) of the Federal Re23 serve Act with respect to a State member

24 wholesale financial institution; and
20

HR 4182 IH

1 (C) section 5136(B)(e) of the Revised

2 Statutes of the United States with respect to a

3 national wholesale financial institution.

4 (2) FOREIGN BANK CAPITAL.—With respect to

5 a branch, agency, or commercial lending company

6 operated in the United States by a foreign bank, the

7 terms ‘‘adequately capitalized’’ and ‘‘well capital8 ized’’ shall be defined and established by the Na9 tional Financial Services Committee for purposes of

10 this Act, provided that such capital standards—

11 (A) are comparable to the capital stand12 ards that apply to other depository institutions

13 for purposes of this Act; and

14 (B) give due regard to the principle of na15 tional treatment and equality of competitive op16 portunity.

17 (r) SECURITIES AFFILIATE.—The term ‘‘securities

18 affiliate’’ means a company that—

19 (1) is an affiliate of a financial services holding

20 company, other than a depository institution; and

21 (2) underwrites or deals in any security; and

22 (3) is (or is required to be) registered under the

23 Securities Exchange Act of 1934 as a broker or

24 dealer,
21

HR 4182 IH

1 but does not include a company that underwrites or deals

2 exclusively in securities that are expressly authorized by

3 section 5136 of the Revised Statutes of the United States

4 as permissible for a national bank to underwrite or deal

5 in.

6 SEC. 103. CHANGES IN CONTROL OF DEPOSITORY INSTITU7 TIONS.

8 No financial services holding company acting directly

9 or indirectly, or through or in concert with one or more

10 other persons, all acquire control of a depository institu11 tion, bank holding company, or financial services holding

12 company not controlled by such company on the date it

13 became a financial services holding company, if such ac14 quisition and control occurs through a purchase, assign15 ment, transfer, pledge, or other deposition of voting stock

16 of such depository institution, bank holding company, or

17 financial services holding company, unless the financial

18 services holding company has complied with the require19 ments of section 7(j) of the Federal Deposit Insurance

20 Act. Any failure to comply with the preceding require21 ments shall subject the relevant financial services holding

22 company to the penalties and other procedures provided

23 in sections 109 through 112, in addition to otherwise ap24 plicable penalties.
22

HR 4182 IH

1 SEC. 104. AFFILIATE TRANSACTIONS.

2 (a) APPLICABILITY OF SECTIONS 23A AND 23B OF

3 THE FEDERAL RESERVE ACT.—

4 (1) IN GENERAL.—The provisions of sections

5 23A and 23B of the Federal Reserve Act shall be

6 applicable to every depository institution controlled

7 by a financial services holding company in the same

8 manner and to the same extent as if such depository

9 institution were a member bank; and for this pur10 pose, any company which would be an affiliate of a

11 depository institution for purposes of such sections

12 23A and 23B if such depository institution were a

13 member bank shall be deemed to be an affiliate of

14 such depository institution.

15 (2) APPLICABILITY TO FOREIGN BANKS.—A de16 pository institution that is a branch, agency or com17 mercial lending company operated in the United

18 States by a foreign bank that is a financial services

19 holding company shall be deemed to satisfy the re20 quirements of paragraph (1) if all of the trans21 actions between the depository institution and any of

22 the following companies affiliated with the deposi23 tory institution comply with the provisions of Sec24 tions 23A and 23B of the Federal Reserve Act in

25 the same manner and to the same extent as if the

26 foreign bank were a member bank—
23

HR 4182 IH

1 (A) a securities affiliate; and

2 (B) any company that is neither a finan3 cial services institution nor primarily engaged

4 in financial activities, other than, with respect

5 to a foreign bank that qualifies as ‘‘predomi6 nantly a financial company’’ under section

7 102(l)(2) rather than section 102(l)(1), an affil8 iate that is held and operated in compliance

9 with the standards of sections 2(h)(2) and

10 2(h)(4) of the Bank Holding Company Act of

11 1956 that would apply if the foreign bank were

12 subject to that Act.

13 (b) ADDITIONAL LIMITATIONS ON AFFILIATE TRANS14 ACTIONS.—

15 (1) IN GENERAL.—The appropriate Federal

16 banking agency may, upon a finding of probable

17 harm that cannot adequately be prevented by less

18 burdensome rules and regulations, adopt such rules

19 and regulations, consistent with the purposes of this

20 Act, as may be necessary in order to prevent a de21 pository institution that is controlled or operated by

22 a financial services holding company from engaging

23 in unsafe or unsound practices that involve the fi24 nancial services holding company or any of its affili25 ates including, without limitation, unsafe or unsound
24

HR 4182 IH

1 practices that involve covered transactions, as de2 fined in section 23A of the Federal Reserve Act, and

3 any transactions described in section 23B(a)(2) of

4 the Federal Reserve Act.

5 (2) REGULATORY ACTIVITY.—Any rule or regu6 lation adopted pursuant to paragraph (1) shall be

7 adopted in accordance with section 553 of title 5,

8 United States Code, except that the appropriate

9 Federal banking agency shall give interested persons

10 an opportunity for oral presentations of data, views,

11 and arguments, in addition to written submissions.

12 (3) APPLICATION TO PRIOR APPROVED TRANS13 ACTIONS.—Any transaction that was approved by an

14 appropriate Federal banking agency before the date

15 of enactment of this Act shall be exempt from any

16 rules or regulations adopted pursuant to paragraph

17 (1).

18 (c) EXCEPTIONS.—With the concurrence of the Na19 tional Financial Services Committee, the appropriate Fed20 eral banking agency may, by rule, regulation or order, ex21 empt any depository institution that is controlled by a fi22 nancial services holding company or class of such institu23 tions, or any transaction or class of transactions (includ24 ing transactions with affiliates that are neither located nor

25 doing business in the United States) from any require-
25

HR 4182 IH

1 ment under subsection (b)(1) or section 23A or 23B of

2 the Federal Reserve Act, notwithstanding the provisions

3 of any other law, rule, regulation or order, if the appro4 priate Federal banking agency deems such an exemption

5 to be reasonable and not inconsistent with the purposes

6 of this Act and in the public interest.

7 (d) SAFEGUARDS RELATING TO NONFINANCIAL AF8 FILIATES.—

9 (1) IN GENERAL.—Except as permitted pursu10 ant to regulations issued by the National Financial

11 Services Committee, no depository institution con12 trolled by a financial services holding company shall

13 directly or indirectly extend credit, or issue or enter

14 into a standby letter of credit, indemnity, guarantee,

15 insurance, or other similar facility to or for the ben16 efit of any affiliate that is neither a financial serv17 ices institution nor primarily engaged in financial

18 activities.

19 (2) EXECPTION FOR CERTAIN FOREIGN

20 BANKS.—A depository institution that is a branch,

21 agency, or commercial lending company operated or

22 controlled by a foreign bank that—

23 (A) is a financial services holding com24 pany; and
26

HR 4182 IH

1 (B) qualifies as ‘‘predominantly a financial

2 company’’ under section 102(l)(2) rather than

3 section 102(l)(1);

4 shall not be subject to the limitation described in

5 paragraph (1) with respect to transactions with af6 filiates that, with respect to that foreign bank, are

7 held and operated in compliance with the standard

8 for investment under section 2(h)(2) of the Bank

9 Holding Company Act of 1956 that would apply if

10 that foreign bank were subject to that Act.

11 (e) PRIMARILY ENGAGED IN FINANCIAL ACTIVI12 TIES.—For purposes of subsections (a)(2)(B) and (d)(1),

13 the term ‘‘primarily engaged in financial activities’’ shall

14 be defined by regulation by the National Financial Serv15 ices Committee.

16 SEC. 105. CAPITAL REQUIREMENTS.

17 (a) WELL-CAPITALIZED DEPOSITORY INSTITU18 TIONS.—Each depository institution that is controlled by

19 a financial services holding company shall be well capital20 ized.

21 (b) ACTIONS BY APPROPRIATE FEDERAL BANKING

22 AGENCY.—In the event of a finding by the appropriate

23 Federal banking agency that a depository institution con24 trolled by a financial services holding company is not well

25 capitalized, the financial services holding company shall—
27

HR 4182 IH

1 (1) execute an agreement with the appropriate

2 Federal banking agency within 30 days to return the

3 depository institution within a reasonable period of

4 time to being well capitalized; or

5 (2) divest control of the depository institution

6 in an orderly manner within 180 days, or such addi7 tional period of time as the appropriate Federal

8 banking agency may determine is reasonably re9 quired in order to effect such divestiture.

10 (c) NO HOLDING COMPANY CAPITAL REQUIRE11 MENTS.—An appropriate Federal banking agency may not

12 impose by regulation, order, agreement, or any other

13 means, any requirement pertaining to the capital of a fi14 nancial services holding company.

15 SEC. 106. INTERSTATE ACQUISITIONS OF INSURED BANKS.

16 (a) INSURED BANKS.—Except as otherwise author17 ized pursuant to section 13(f) of the Federal Deposit In18 surance Act, no financial services holding company may

19 acquire control of an additional insured bank (as such

20 term is defined in section 2(c) of the Bank Holding Com21 pany Act of 1956) if the acquisition could not be approved

22 by the Board of Governors of the Federal Reserve System

23 under any provision of section 3(d) of the Bank Holding

24 Company Act of 1956, other than subsection (d)(1)(A),

25 if such acquisition were made by a bank holding company.
28

HR 4182 IH

1 (b) TREATMENT OF FINANCIAL SERVICES HOLDING

2 COMPANIES AND SUBSIDIARIES.—For purposes of section

3 18(r) of the Federal Deposit Insurance Act, a financial

4 services holding company shall be treated as a bank hold5 ing company, and any depository institution affiliate of a

6 financial services holding company shall be treated as a

7 bank subsidiary.

8 SEC. 107. DIFFERENTIAL TREATMENT PROHIBITION; LAWS

9 INCONSISTENT WITH THIS ACT.

10 (a) IN GENERAL.—Notwithstanding any other Fed11 eral law, no State, and no Federal or State regulatory

12 agency, including the appropriate Federal banking agency,

13 may act by law, rule, regulation, order, or otherwise if the

14 effect of such action would be to differentiate depository

15 institutions controlled by financial services holding compa16 nies from any other depository institutions in a manner

17 adverse to depository institutions controlled by financial

18 services holding companies, or to differentiate financial

19 services holding companies or their affiliates from bank

20 holding companies and their affiliates in a manner adverse

21 to financial services holding companies or their affiliates,

22 except to the extent that the appropriate Federal banking

23 agency may act to implement this Act.

24 (b) APPLICATION OF STATE LAWS.—

25 (1) FINDINGS.—The Congress finds that:
29

HR 4182 IH

1 (A) Certain State laws and regulations

2 have the purpose or effect of preventing deposi3 tory institutions from being or becoming affili4 ated with, companies or persons engaged in

5 nonbanking activities.

6 (B) Such laws restrain legitimate competi7 tion in interstate commerce and deny consum8 ers freedom of choice in selecting financial serv9 ices.

10 (C) Such restrictions also threaten the

11 long-term safety and soundness of depository

12 institutions by denying them access to capital.

13 (D) Given the preponderant Federal inter14 est in ensuring competition in national markets

15 for financial services and in ensuring the safety

16 and soundness of depository institutions, it is

17 necessary to preempt such anticompetitive State

18 laws and regulations to the extent necessary to

19 permit the formation and efficient operation of

20 financial services holding companies.

21 (E) There is, however, a legitimate and

22 traditional State interest in ensuring that State

23 depository institutions and other State-char24 tered or licensed companies are operated in a
30

HR 4182 IH

1 safe and sound manner to serve the interests of

2 the public and consumers.

3 (F) The preemption provided in paragraph

4 (2) is not intended to preempt State laws that

5 concern the regulation, supervision, and exam6 ination of State chartered or licensed entities,

7 and that are not inconsistent with the purposes

8 of this Act.

9 (2) PREEMPTIONS.—

10 (A) CROSS-MARKETING.—Any provision of

11 Federal or State law, rule, regulation, or order

12 that is expressly or impliedly inconsistent with

13 the provisions and purposes of this Act is here14 by preempted, including, without limitation,

15 State banking, savings and loan, insurance, real

16 estate, securities, finance company, retail, or

17 other laws which have the purpose or effect

18 of—

19 (i) preventing or impeding depository

20 institutions or affiliates, agents, principals,

21 brokers, directors, officers, employees, or

22 other representatives of such institutions

23 or affiliates thereof, as a result of the

24 types of nonbanking activities engaged in

25 directly or indirectly by such company or
31

HR 4182 IH

1 any affiliate thereof or by any agent, prin2 cipal, solicitor, broker, director, officer,

3 employee, or other representative of such

4 company or affiliate thereof, form being

5 owned or controlled by or from being affili6 ated in any way with a financial services

7 holding company or any affiliate thereof;

8 or

9 (ii) preventing or impeding depository

10 institutions or affiliates, agents, principals,

11 brokers, directors, officers, employees or

12 other representatives of such institutions

13 or affiliates thereof from offering or mar14 keting products or services of their affili15 ated financial services holding company or

16 any affiliate thereof or from having their

17 products or services offered or marketed by

18 their affiliated financial services holding

19 company or any affiliate thereof, or by any

20 agent, principal, broker, director, officer,

21 employee, or other representative of such

22 company or affiliate thereof.

23 (B) INFORMATION SHARING.—

24 (i) IN GENERAL.—Notwithstanding

25 any other provision of law, any depository
32

HR 4182 IH

1 institution, or any affiliate or subsidiary of

2 any depository institution, may share or

3 exchange information or otherwise transfer

4 information between or among themselves

5 without any restriction or limitation if it is

6 clearly and conspicuously disclosed that the

7 information may be communicated among

8 such persons and the consumer is given

9 the opportunity, before the time that the

10 information is initially communicated, to

11 direct that such information not be com12 municated among such persons.

13 (ii) DEFINITION.—For purposes of

14 this subsection, the term ‘‘information’’

15 means any and all data, records, or other

16 information and material obtained or

17 maintained by any depository institution or

18 any affiliate or subsidiary thereof in the

19 ordinary course of its business that relates

20 in any way to a person who applies for,

21 maintains, or has maintained an account

22 or credit relationship with or applied for,

23 purchased or obtained other products or

24 services from any depository institution or

25 any affiliate or subsidiary of any deposi-
33

HR 4182 IH

1 tory institution, regardless of the source or

2 manner in which the information is ob3 tained or furnished.

4 (c) LAWS AFFECTING COURT ACTIONS.—

5 (1) IN GENERAL.—No State or State regulatory

6 agency may act by law, rule, regulation, or order if

7 the effect of such action would be to impede or pre8 vent a depository institution that is located in an9 other State from qualifying to maintain or defend in

10 court any action which could be maintained or de11 fended under similar circumstances by a company

12 that is located in such other State and that is not

13 a depository institution, if the depository institution

14 does not establish or operate in that State a domes15 tic branch.

16 (2) EXCEPTION.—Where the maintenance or

17 defense of a court action referred to in paragraph

18 (1) by a company that is located in such other State

19 and that is not a depository institution is subject to

20 certain conditions, the maintenance or defense of

21 such an action by a depository institution located in

22 such other State may be subject to those same con23 ditions, if such conditions are applied in a non24 discriminatory manner to fulfill legitimate State ob25 jectives and do not have the effect, directly or indi-
34

HR 4182 IH

1 rectly, of denying depository institutions located in

2 other States the opportunity to maintain or defend

3 such actions.

4 (d) OTHER RESTRICTIONS.—Except for licensing,

5 marketing, compensation, employment, or other require6 ments applied in a nondiscriminatory manner to fulfill le7 gitimate State regulatory objectives which are not incon8 sistent with the purposes of this Act, no State may,

9 through legislative, administrative, executive, or judicial

10 action, impede or prevent a financial services holding com11 pany or affiliate thereof from utilizing or compensating

12 any agent (including an affiliated depository institution

13 acting in accordance with section 18(r) of the Federal De14 posit Insurance Act), solicitor, broker, employee, or other

15 person located in that State and representing in any lawful

16 capacity any depository institution or any such financial

17 services holding company or such affiliate thereof, pro18 vided that if any such person is being utilized or com19 pensated for the performance of activities on behalf of a

20 depository institution, such activities do not result in the

21 establishment or operation by the depository institution of

22 a domestic branch at any location other than the main

23 or branch offices of such depository institution.

24 (e) DEFINITIONS.—As used in subsections (b)

25 through (d) only—
35

HR 4182 IH

1 (1) the term ‘‘affiliate’’ means a person that di2 rectly or indirectly controls or is controlled by, or is

3 under common control with the person specified; and

4 (2) the term ‘‘control,’’ including the terms

5 ‘‘controlled by’’ and ‘‘under common control with,’’

6 means the power, directly or indirectly, to direct the

7 management or policies of a person and shall be pre8 sumed to exist if any person, directly or indirectly,

9 owns, controls, or holds with power to vote 10 per10 cent or more of the voting securities of any other

11 person.

12 SEC. 108. TYING AND INSIDER LENDING PROVISIONS.

13 (A) IN GENERAL.—A financial services holding com14 pany shall be treated as a bank holding company, and any

15 depository institution controlled by such financial services

16 holding company shall be treated as a bank, for purposes

17 of section 106 of the Bank Holding Company Act Amend18 ments of 1970 and section 22(h) of the Federal Reserve

19 Act and any regulation prescribed under any such sec20 tions.

21 (b) ADDITIONAL LIMITATIONS ON TIE-IN ARRANGE22 MENTS.—A financial services holding company and any of

23 such company’s nonbanking subsidiaries shall be subject

24 to the same limitations, if any, including any exceptions

25 thereto, as the Board of Governors of the Federal Reserve
36

HR 4182 IH

1 System may by regulation impose on bank holding compa2 nies and their nonbanking subsidiaries with respect to ex3 tending credit, leasing or selling property of any kind, pro4 viding any service, or fixing or varying the consideration

5 for any such transaction subject to any condition or re6 quirement that, if imposed by a bank, would constitute

7 an unlawful tie-in arrangement under section 106 of the

8 Bank Holding Company Act Amendments of 1970.

9 (c) REGULATORY AUTHORITY.—For purposes of this

10 subsection, the appropriate Federal banking agency shall

11 exercise the authority provided to the Board of Governors

12 of the Federal Reserve System under section 106 of the

13 Bank Holding Company Act Amendments of 1970 and

14 section 22(h) of the Federal Reserve Act.

15 SEC. 109. REPORTS, EXAMINATION AND ENFORCEMENT.

16 (a) NOTICE.—

17 (1) TIMING.—Within 90 days after filing the

18 notice referred to in section 102(a)(1), each financial

19 services holding company shall file a separate notice

20 with the appropriate Federal banking agency for the

21 lead depository institution of such company.

22 (2) FORM AND CONTENT.—The notice required

23 by paragraph (1) shall be on forms prescribed by the

24 National Financial Services Committee, and shall in25 clude such information under oath or otherwise, with
37

HR 4182 IH

1 respect to the financial condition, ownership, oper2 ation and management of such financial services

3 company and its subsidiaries, and related matters,

4 as the Committee may deem necessary or appro5 priate for the appropriate Federal banking agency to

6 ascertain and monitor the impact that such financial

7 services holding company and its subsidiaries may

8 have on the safety and soundness of any depository

9 institution affiliated with such financial services

10 holding company or to otherwise carry out the pur11 poses of this Act.

12 (b) REPORTS.—

13 (1) IN GENERAL.—The appropriate Federal

14 banking agency of the lead depository institution of

15 a financial services holding company from time to

16 time may require such holding company and any

17 subsidiary of such company to submit reports under

18 oath to keep such agency informed as to—

19 (A) the company’s or the subsidiary’s ac20 tivities, financial condition, policies, systems for

21 monitoring and controlling financial and oper22 ational risks, to the extent that the appropriate

23 Federal banking agency has reason to believe

24 that such activities, financial condition, policies,

25 and systems may materially affect the safety
38

HR 4182 IH

1 and soundness of any depository institution

2 subsidiary of the company;

3 (B) the company’s or the subsidiary’s

4 transactions with depository institution subsidi5 aries of the company; and

6 (C) the extent to which the company or

7 subsidiary has complied with the provisions of

8 the Act and regulations prescribed and orders

9 issued under this Act.

10 (2) USE OF EXISTING REPORT.—

11 (A) IN GENERAL.—The appropriate Fed12 eral banking agency described in paragraph (1)

13 shall, to the fullest extent possible, accept re14 ports in fulfillment of such agency’s reporting

15 requirements under this paragraph that a fi16 nancial services holding company or any sub17 sidiary of such company has been required to

18 provide to other Federal and State supervisors

19 or to appropriate self-regulatory organizations.

20 (B) AVAILIBILITY.—A financial services

21 holding company or a subsidiary of such com22 pany shall provide to the appropriate Federal

23 banking agency described in paragraph (1), at

24 the request of such agency, a report referred to

25 in subparagraph (A).
39

HR 4182 IH

1 (3) The National Financial Services Committee

2 shall prescribe by regulation uniform standards for

3 the form and content of the reports required by this

4 subsection.

5 (4) EXEMPTIONS FROM REPORTING REQUIRE6 MENTS.—

7 (A) IN GENERAL.—The National Financial

8 Services Committee may, by regulation or

9 order, exempt any company or class of compa10 nies, under such terms and conditions and for

11 such periods as the Committee shall provide in

12 such regulation or order, from the provisions of

13 this subsection and any regulations prescribed

14 under this subsection.

15 (B) CRITERIA FOR CONSIDERATION.—In

16 granting any exemption under subparagraph

17 (A), the Committee shall consider, among other

18 factors—

19 (i) whether information of the type re20 quired under this subsection is available

21 from a supervisory agency (as defined in

22 section 1101(7) of the Right to Financial

23 Privacy Act of 1978), the Commodity Fu24 tures Trading Commission, or a foreign

25 regulatory body of a similar type;
40

HR 4182 IH

1 (ii) the primary business of the com2 pany;

3 (iii) the nature and extent of domestic

4 or foreign regulation of the company’s ac5 tivities; and

6 (iv) whether the companies’ activities

7 could pose a significant risk to the safety

8 and soundness of any depository institu9 tion subsidiary of the financial services

10 holding company.

11 (c) EXAMINATIONS.—

12 (1) IN GENERAL.—For purposes of this Act,

13 the appropriate Federal banking agency of the lead

14 depository institution of a financial services holding

15 company may examine such holding company, but

16 only to the extent permitted by this subsection.

17 (2) STANDARD FOR EXAMINATIONS.—The ap18 propriate Federal banking agency for the lead depos19 itory institution of a financial services holding com20 pany shall not examine such holding company un21 less—

22 (A) such agency determines, on the basis

23 of all information available to such agency that

24 the operations or activities of the financial serv25 ices holding company or any subsidiary of such
41

HR 4182 IH

1 company, or any transaction involving such

2 company or subsidiary and an affiliated deposi3 tory institution, may pose a material risk to the

4 safety and soundness of any depository institu5 tion controlled by such holding company; or

6 (B) such agency is unable to determine

7 from reports the nature of the operations, fi8 nancial condition, activities, or effectiveness of

9 the risk management systems of the financial

10 services holding company or any subsidiary of

11 such company, or to assess compliance with the

12 provisions of this Act.

13 (3) RESTRICTED FOCUS OF EXAMINATIONS.—

14 The appropriate Federal banking agency of the lead

15 depository institution of a financial services holding

16 company shall limit the focus and scope of any ex17 amination permitted by this subsection to the con18 solidated holding company, provided, however, that

19 such examination shall not extend to any subsidiary

20 of such holding company (other than a depository

21 institution subsidiary).

22 (4) DEFERENCE TO OTHER BANK EXAMINA23 TIONS.—

24 (A) IN GENERAL.—For purposes of this

25 subsection, the appropriate Federal banking
42

HR 4182 IH

1 agency of the lead depository institution of the

2 financial services holding company shall, to the

3 fullest extent possible, use the report of exami4 nations of other appropriate Federal banking

5 agencies or the appropriate State depository in6 stitution supervisory authority.

7 (B) APPLICABILITY TO FOREIGN BANKS.—

8 For purposes of this subsection, with respect to

9 a foreign bank that is a financial services hold10 ing company, the appropriate Federal banking

11 agency shall give due regard to the primary au12 thority and responsibility of the foreign bank’s

13 home country regulator for supervision and ex14 amination of the bank outside the United

15 States and shall seek to minimize additional ex16 amination or regulatory burdens on the foreign

17 bank outside of the United States, by coordinat18 ing with and relying on examinations of and in19 formation from the home country regulator to

20 the fullest extent possible.

21 (5) USE OF OTHER EXAMINATIONS OF REGU22 LATED SUBSIDIARIES.—In order to conduct an ex23 amination of a consolidation holding company pursu24 ant to this subsection, the appropriate Federal bank-
43

HR 4182 IH

1 ing agency of the lead depository institution of such

2 company—

3 (A) shall have access to, and may use, the

4 reports of examination made of—

5 (i) any registered broker or dealer by

6 or on behalf of the Securities Exchange

7 Commission, and

8 (ii) any other subsidiary that such

9 agency finds to be comprehensively super10 vised under relevant Federal or State law

11 by a Federal or State agency or authority;

12 and

13 (B) may request any agency that regulates

14 a subsidiary described in clause (i) to examine

15 and provide information concerning any aspect

16 of such subsidiary’s activities that the appro17 priate Federal banking agency deems necessary

18 or appropriate to carry out the purposes of this

19 section, and such other agency shall, to the ex20 tent practicable, comply with such request.

21 (6) CONFIDENTIALITY OF REPORTED INFORMA22 TION.—

23 (A) IN GENERAL.—Notwithstanding any

24 other provision of law, an appropriate Federal

25 banking agency shall not be compelled to dis-
44

HR 4182 IH

1 close any information required to be reported

2 under this subsection, or any information sup3 plied to such agency by any domestic or foreign

4 regulatory agency, that relates to the financial

5 services holding company or any subsidiary of

6 such company.

7 (B) COMPLIANCE WITH REQUESTS FOR IN8 FORMATION.—No provision of this subpara9 graph shall be construed as authorizing an ap10 propriate Federal banking agency to withhold

11 information from Congress, or preventing such

12 agency from complying with a request for infor13 mation from any other Federal department or

14 agency for purposes within the scope of such

15 department’s or agency’s jurisdiction, or from

16 complying with an order of a court of com17 petent jurisdiction in an action brought by the

18 United States or such agency.

19 (C) COORDINATION WITH OTHER LAW.—

20 For purposes of section 552 of title 5, United

21 States Code, this subparagraph shall be consid22 ered to be a statute described in subsection

23 (b)(3)(B) of such section.

24 (D) DESIGNATION OF CONFIDENTIAL IN25 FORMATION.—In prescribing regulations to
45

HR 4182 IH

1 carry out the requirements of this subsection,

2 an appropriate Federal banking agency shall

3 designate information described in or obtained

4 pursuant to this paragraph as confidential in5 formation.

6 (E) COSTS.—The cost of any examination

7 conducted by an appropriate Federal banking

8 agency under this section may be assessed

9 against, and made payable by, such holding

10 company.

11 (d) TERMINATION.— The National Financial Serv12 ices Committee may at any time, upon its own motion or

13 upon application, terminate the status of a company as

14 a financial services holding company, if it is determined

15 that such company no longer controls or operates any de16 pository institutions or otherwise fails to qualify as a fi17 nancial services holding company as defined in this Act.

18 (e) NO EXTENSION OF INSURANCE COVERAGE.—In

19 no instance shall the benefits of Federal deposit insurance

20 coverage applicable to an insured depository institution

21 that is controlled by a financial services holding company

22 be extended or interpreted to extend to either such finan23 cial services holding company or to any other company

24 controlled by such financial services holding company that

25 is not an insured depository institution.
46

HR 4182 IH

1 (f) ENFORCEMENT OF VIOLATIONS.—Whenever it

2 appears to the appropriate Federal banking agency of the

3 lead depository institution of a financial services holding

4 company that such holding company is violating, has vio5 lated, or is about to violate any provision of this Act or

6 any regulation prescribed under this Act, such agency

7 may, in its discretion, apply to the appropriate district

8 court of the United States or the United States court of

9 any territory for—

10 (1) a temporary or permanent injunction or re11 straining order enjoining such financial services

12 holding company from violating this Act or any reg13 ulation prescribed under this Act; or

14 (2) such other equitable relief, including divesti15 ture, as may be necessary to prevent such violation.

16 (g) COURT JURISDICTION.—The district courts of the

17 United States and the United States court in any territory

18 shall have jurisdiction and power to issue any injunction

19 or restraining order or grant any other relief described in

20 subsection (f). When appropriate, any injunction, order,

21 or other equitable relief granted under this subparagraph

22 shall be granted without requiring the posting of any

23 bond.

24 (h) NOTICE OF VIOLATIONS.—Whenever it appears

25 to a Federal or State official or agency with supervisory
47

HR 4182 IH

1 or examination authority over any affiliate of a financial

2 services holding company that such affiliate or such finan3 cial services holding company is violating, has violated, or

4 is about to violate any provision of this Act or any regula5 tion prescribed under this Act, such official or agency shall

6 promptly notify the appropriate Federal banking agency

7 of the lead depository institution of such holding company

8 in order that such banking agency, in consultation with

9 the notifying agency, may determine whether action under

10 this section is appropriate.

11 SEC. 110. DIVESTITURE.

12 (a) IN GENERAL.—In addition to all of its other reg13 ulatory and supervisory powers, if the appropriate Federal

14 banking agency determines that a depository institution

15 under its supervision has engaged in a continuing course

16 of conduct involving its financial services holding company

17 or any affiliate of such holding company which has had,

18 or has a significant probability of having, the effect of

19 causing such depository institution to be in an unsafe or

20 unsound condition, it may make an initial finding that the

21 financial services holding company should be required to

22 terminate its control or operation of the depository institu23 tion. If the appropriate Federal banking agency makes

24 such an initial finding, it shall within 3 days so notify the

25 financial services holding company controlling or operating
48

HR 4182 IH

1 the depository institution and the National Financial Serv2 ices Committee. Such notice shall provide a statement for

3 the basis of the appropriate Federal banking agency’s ac4 tion.

5 (b) HEARING PROCEDURES.—Not later than 30 days

6 after receipt of the notice described in subsection (a), the

7 financial services holding company receiving such notice

8 may request an agency hearing before the appropriate

9 Federal banking agency. In such hearing, all issues shall

10 be determined pursuant to section 554 of title 5, United

11 States Code. The length of the hearing shall be determined

12 by the appropriate Federal banking agency, and such

13 hearing may be before a hearing examiner appointed by

14 such agency. At the conclusion thereof, the appropriate

15 Federal banking agency shall issue a final order, on the

16 basis of the record made at such hearing, affirming or re17 versing the initial finding of the appropriate Federal bank18 ing agency. A company that fails to request an agency

19 hearing under this paragraph shall be deemed to have con20 sented to the issuance of a final order affirming the initial

21 finding without the necessity of the hearing provided for

22 in this paragraph.

23 (c) TERMINATION OF CONTROL.—If such final order

24 affirms the initial finding, the financial services holding

25 company shall, upon completion of the judicial review, if
49

HR 4182 IH

1 any, of the appropriate Federal banking agency’s final

2 order as provided for in section 113, terminate its control

3 or operation of the depository institution involved within

4 1 year or such longer period as the appropriate Federal

5 banking deems necessary and appropriate to protect the

6 safety and soundness of the depository institution or pre7 vent financial disruption.

8 SEC. 111. CRIMINAL PENALTIES.

9 (a) WILLFUL VIOLATIONS.—Any company or insured

10 depository institution which knowingly and willfully par11 ticipates in a material violation of any provision of this

12 Act, or any rule, regulation, or order issued by an appro13 priate Federal banking agency pursuant thereto, shall,

14 upon conviction, be fined for each violation not more than

15 the greater of $250,000 or an amount equal to one one

16 hundreth of 1 percent of the minimum required capital

17 of the lead depository institution of the financial services

18 holding company for each day during which the violation

19 continues, except that in no case shall any such amount

20 for any violation or related series of violations exceed 1

21 percent of the minimum required capital of the lead depos22 itory institution.

23 (b) ENFORCEMENT AGAINST INDIVIDUALS.—Any

24 natural person who knowingly and willfully participates in

25 a material violation of any provision of this Act or any
50

HR 4182 IH

1 rule, regulation, or order issued pursuant thereto, shall

2 upon conviction be imprisoned not more than 5 years and

3 fined for each violation not more than the greater of

4 $250,000 or double the individual’s annual compensation

5 at the time the violation occurred.

6 (c) ENFORCEABILITY AGAINST OFFICERS AND EM7 PLOYEES.—Every officer, director, employee, and agent of

8 a financial services holding company or depository institu9 tion also shall be subject to the same penalties for false

10 entries in any book, report, or statement of such company

11 or depository institution as are applicable to officers, di12 rectors, employees, and agents of member banks for false

13 entries in any books, reports, or statements of member

14 banks under section 1005 of title 18, United States Code.

15 (d) ENFORCEABILITY AGAINST HOLDING COMPA16 NIES.—A financial services holding company and its affili17 ates shall be subject to the provisions of title 18, United

18 States Code, to the same extent as a registered bank hold19 ing company or any affiliate of such a company.

20 SEC. 112. CIVIL ENFORCEMENT, CEASE-AND-DESIST OR21 DERS, CIVIL MONEY PENALTIES, REMOVAL,

22 AND PROHIBITION AUTHORITY.

23 Subsections (b) through (s) and subsection (u) of sec24 tion 8 of the Federal Deposit Insurance Act shall apply

25 to any financial services holding company in the same
51

HR 4182 IH

1 manner as they apply to an insured depository institution.

2 Nothing in subsection (b) or (c) of that section 8 shall

3 authorize any Federal banking agency, other than the ap4 propriate Federal banking agency, to issue a notice of

5 charges or cease-and-desist order against a financial serv6 ices holding company.

7 SEC. 113. JUDICIAL REVIEW.

8 Any party aggrieved by an appropriate Federal bank9 ing agency’s findings or other actions under this Act may

10 obtain review by the United States court of appeals of the

11 circuit wherein such party has its principal place of busi12 ness or the United States Court of Appeals for the District

13 of Columbia Circuit, by filing a Notice of Appeal in such

14 court within 30 days from the date of such action, and

15 simultaneously sending a copy of such notice by registered

16 or certified mail to the appropriate Federal banking agen17 cy. The appropriate Federal banking agency shall prompt18 ly certify and file in such court the record upon which

19 such action or finding was based. The actions or findings

20 of the appropriate Federal banking agency shall be set

21 aside if not supported by substantial evidence or if found

22 to violate procedures established by this Act. An initial

23 finding by the appropriate Federal banking agency under

24 section 110 shall be subject to judicial review only in the

25 context of review of a final order under section 110(b).
52

HR 4182 IH

1 SEC. 114. NATIONAL FINANCIAL SERVICES COMMITTEE.

2 (a) ESTABLISHMENT.—There is established a Na3 tional Financial Services Committee which shall consist

4 of—

5 (1) the Secretary of the Treasury;

6 (2) the Chairman of the Board of Governors of

7 the Federal Reserve System;

8 (3) the Chairman of the Board of Directors of

9 the Federal Deposit Insurance Corporation;

10 (4) the Comptroller of the Currency; and

11 (5) the Chairman of the Securities and Ex12 change Commission.

13 (b) MEMBER AGENCIES.—For purposes of this Act,

14 the agencies or departments headed by members of the

15 committee shall be referred to as ‘‘member agencies’’.

16 (c) CHAIR.—The Chair of the Committee shall be the

17 Secretary of the Treasury.

18 (d) COMPENSATION.—Each member of the Commit19 tee shall serve without additional compensation, but shall

20 be entitled to reasonable expenses incurred in carrying out

21 the official duties as such a member.

22 (e) PUBLIC MEETINGS.—The Committee shall hold

23 public meetings at least annually. All meetings of the

24 Committee shall be conducted in conformity with the pro25 visions of section 3(a) of the Government in the Sunshine

26 Act (5 U.S.C. 552b). The Committee may not take any
53

HR 4182 IH

1 action unless such action is approved by a majority vote

2 of the members of the Committee.

3 (f) SECRETARIAT.—The Department of the Treasury

4 shall provide the Secretariat for the Committee and shall

5 assume any expenses arising from execution of the respon6 sibilities of the Committee, except for expenses incurred

7 by employees of any Member of the Committee.

8 (g) ACCESS TO RECORDS.—For the purpose of carry9 ing out this section, the Committee shall have access to

10 all books, accounts, records, reports, files, memoranda, pa11 pers, things, and property belonging to or in use by any

12 appropriate Federal banking agency.

13 (h) FUNCTIONS OF THE COMMITTEE.—

14 (1) UNIFORM PRINCIPLES AND STANDARDS.—

15 The Committee shall, insofar as is practicable, es16 tablish uniform principles and standards applicable

17 to the notices, reports, examinations and supervision

18 of financial services institutions regulated by the

19 member agencies, and to the extent permitted by

20 this Act, financial services holding companies, which

21 principles and standards shall be applied by the

22 member agencies.

23 (2) RECOMMENDATIONS.—The Committee shall

24 make recommendations for uniformity in other su25 pervisory matters, such as, but not limited to, identi-
54

HR 4182 IH

1 fying financial services institutions and other provid2 ers of financial services in need of special super3 visory attention, the adequacy of supervisory tools

4 for determining the impact of affiliate operations on

5 insured depository institutions, and the ability of the

6 member agencies to discover possible fraud or ques7 tionable practices.

8 (3) RECOMMENDATIONS TO CONGRESS.—The

9 Committee shall, from time to time, recommend to

10 the Congress additional measures to strengthen the

11 separation between insured depository institutions

12 controlled by depository institutions holding compa13 nies from the activities of any of their affiliates, in14 cluding the imposition of additional restrictions on

15 interaffiliate transactions and the strict application

16 of Federal deposit insurance coverage only for the

17 benefit of depositors of insured depository institu18 tions.

19 (i) CONSULTATION WITH STATE REGULATORS.—The

20 Committee shall consult with the appropriate organiza21 tions representing the State regulators of banks, savings

22 and loan associations, savings banks, securities firms, in23 surance companies, and other providers of financial serv24 ices, and as deemed appropriate, meet with such State reg25 ulators. The Committee, when appropriate, shall invite to
55

HR 4182 IH

1 each public meeting of the Committee representatives of

2 such organizations.

3 (j) STUDIES AND RECOMMENDATIONS.—The Com4 mittee may conduct or authorize studies to carry out the

5 purposes of this Act. On the basis of such studies, the

6 Committee may make recommendations to the Congress

7 and member agencies concerning the implementation of

8 this Act and changes in statutes and regulations necessary

9 to promote the strength and stability of the Nation’s fi10 nancial system and financial institutions, the competitive11 ness of providers of financial services in domestic and

12 international markets, and the purposes of this Act. Not

13 later than 1 year after the date of the enactment of this

14 Act, the Committee shall report to the Congress on pro15 posals for legislative or regulatory actions that will im16 prove the examination process to permit better oversight

17 of all insured depository institutions. In particular, the

18 Committee shall consider whether the number of, or com19 pensation for, examiners employed by the appropriate

20 Federal regulatory agencies should be increased.

21 (k) NOTICE PROCEDURES FOR DETERMINING NEW

22 FINANCIAL SERVICES INSTITUTIONS AND NEW FINAN23 CIAL ACTIVITIES.—
56

HR 4182 IH

1 (1) NOTICE REQUIREMENT.—A financial serv2 ices holding company may request the Committee to

3 determine that—

4 (A) an activity not described in section

5 102(n) (1)–(12) constitutes a financial activity

6 pursuant to section 102(n)(13); or

7 (B) a company not described in section

8 102(m) (1)–(8) is a financial services institu9 tion pursuant to section 102(m)(9),

10 by providing the Committee with written notice de11 scribing the proposed activity or institution.

12 (2) CONTENTS OF NOTICE.—The notice submit13 ted to the Committee shall contain such information

14 as the Committee shall prescribe by regulation or by

15 specific request in connection with a particular no16 tice.

17 (3) PROCEDURE FOR COMMITTEE ACTION.—

18 (a) NOTICE OF DISAPPROVAL.—Any notice

19 filed under this subsection shall be deemed to

20 be approved by the Committee unless before the

21 end of the 60-day period beginning on the date

22 the Committee receives a complete notice under

23 subparagraph (1), the Committee issues an

24 order determining the activity does not con25 stitute a financial activity or the institution is
57

HR 4182 IH

1 not a financial services institution and setting

2 forth the reasons for disapproval.

3 (B) EXTENSION OF PERIOD.—The Com4 mittee may extend the 60-day period referred to

5 in subparagraph (A) for an additional 30 days.

6 The Committee may further extend the period

7 with the agreement of the financial services

8 holding company submitting the notice pursu9 ant to this subsection.

10 (4) SHORTER PERIODS.—The Committee may

11 prescribe regulations which provide for a shorter no12 tice period than the periods described in subpara13 graphs (A) and (B).

14 (5) INCOMPLETE INFORMATION.—The Commit15 tee may determine that an activity or an institution

16 for which notice has been submitted pursuant to this

17 subsection, does not constitute a financial activity or

18 is not a financial services institution, if the financial

19 services holding company submitting such notice ne20 glects, fails, or refuses to furnish the Committee all

21 the information required by the Committee.
58

HR 4182 IH

1 Subtitle B—Securities Activities of Financial

2 Services Holding Companies

3 SEC. 121. LIMITATION ON SECURITIES ACTIVITIES OF DE4 POSITORY INSTITUTIONS AFFILIATED WITH

5 SECURITIES AFFILIATES.

6 (a) IN GENERAL.—A financial services holding com7 pany that is affiliated with a securities affiliate shall not

8 permit any depository institution, or any subsidiary of any

9 depository institution, which is controlled by such holding

10 company to engage, directly or indirectly in the United

11 States—

12 (1) in underwriting securities backed by or rep13 resenting interests in notes, drafts, acceptances,

14 loans, leases, receivables, other obligations, or pools

15 of any such obligations originated or purchased by

16 the institution or its affiliates; or

17 (2) in underwriting or dealing in any other se18 curities,

19 except securities expressly authorized by section 5136 of

20 the Revised Statutes of the United States as permissible

21 for a national bank to underwrite or deal in.

22 (b) RULE OF CONSTRUCTION.—No provision of this

23 section shall be construed as permitting a securities affili24 ate to accept deposits in contravention of section 21 of

25 the Banking Act of 1933.
59

HR 4182 IH

1 (c) DEFINITION OF SECURITY.—

2 (1) IN GENERAL.—For purposes of this section,

3 the term ‘‘security’’ has the meaning given to such

4 term in section 3(a)(10) of the Securities Exchange

5 Act of 1934.

6 (2) EXCEPTIONS.—Notwithstanding any other

7 provision of law, the term ‘‘security’’ does not in8 clude any of the following for purposes of this sec9 tion:

10 (A) A contract of insurance.

11 (B) A deposit account, savings account,

12 certificate of deposit, or other deposit instru13 ment issued by a depository institution.

14 (C) A share account issued by a savings

15 association if the account is insured by the Fed16 eral Deposit Insurance Corporation.

17 (D) A banker’s acceptance.

18 (E) A letter of credit issued by a deposi19 tory institution.

20 (F) A debit account at a depository insti21 tution arising from a credit card or similar ar22 rangement.

23 (G) A loan or loan participation (as deter24 mined by the appropriate Federal banking

25 agency), including any debt security issued in
60

HR 4182 IH

1 connection with sovereign debt restructuring

2 which a bank purchases and sells pursuant to

3 such bank’s lending authority.

4 (H) A qualified financial contract (as de5 fined in section 11(e)(8)(d)(i) of the Federal

6 Deposit Insurance Act), as determined by the

7 appropriate Federal Banking agency, after con8 sultation with and consideration of the views of

9 the Securities and Exchange Commission, ex10 cept that, for purposes of this section such term

11 does not include—

12 (i) any securities contract (as defined

13 in section 11(e)(8)(D)(ii) of such Act) that

14 is based on or directly relates to a security

15 that is not expressly authorized by section

16 5136 of the Revised Statutes of the United

17 States as permissible for a national bank

18 to underwrite or deal in unless the appro19 priate Federal banking agency determines,

20 after consultation with and consideration

21 of the views of the Securities and Ex22 change Commission, that such securities

23 contract is appropriate for a bank to un24 derwrite or deal in, taking into account

25 other qualified financial contracts which a
61

HR 4182 IH

1 bank is permitted to underwrite or deal in;

2 and

3 (ii) any agreement, contract, or trans4 action which is determined by the Federal

5 Deposit Insurance Corporation in a regula6 tion prescribed after the date of the enact7 ment of this Act to be a qualified financial

8 contract unless the appropriate Federal

9 banking agency determines, after consulta10 tion with and consideration of the views of

11 the Securities and Exchange Commission,

12 that such agreement, contract, or trans13 action shall be treated as a qualified finan14 cial contract for purposes of this section.

15 (3) AUTHORITY TO EXEMPT BANKING PROD16 UCTS.—Notwithstanding any other provision of law,

17 the appropriate Federal banking agency may, by

18 regulation or order, exempt a banking product from

19 the definition of security if the appropriate Federal

20 banking agency finds that—

21 (i) the product is available in the

22 course of a banking business and is more

23 appropriately regulated as a banking prod24 uct; and
62

HR 4182 IH

1 (ii) the exemption is otherwise consist2 ent with the purposes of this section, the

3 maintenance of fair and orderly markets,

4 and the protection of investors.

5 (4) DEFINITION FOR LIMITED PURPOSE.—The

6 fact that a particular instrument is excluded pursu7 ant to paragraph (2) or (3) from the definition of

8 security for purposes of this section shall not be con9 strued as finding or implying that such instrument

10 is or is not a security for purposes of—

11 (A) Federal securities law;

12 (B) section 5136 of the Revised Statutes

13 of the United States; or

14 (C) sections 20, 21, or 32 of the Banking

15 Act of 1933 (12 U.S.C. 377, 378, and 78).

16 (5) RESERVATION OF AUTHORITY TO CHARTER17 ING AUTHORITY.—A determination by the appro18 priate Federal banking agency under this subsection

19 shall not be construed in any way as authorizing a

20 bank to provide any product or service that the bank

21 is not otherwise authorized to provide under relevant

22 law governing the activities and powers of the bank.

23 (6) CONSULTATION WITH COMMISSION.—

24 (A) NOTICE AND CONSULTATION RE25 QUIRED.—In determining whether to exempt a
63

HR 4182 IH

1 banking product pursuant to paragraph (3), the

2 appropriate Federal banking agency shall pro3 vide written notice to, consult with, and con4 sider the views of the Securities and Exchange

5 Commission.

6 (B) RESPONSE AND PUBLICATION.—If the

7 Securities and Exchange Commission comments

8 in writing on a proposed determination of the

9 appropriate Federal banking agency, such agen10 cy shall—

11 (i) respond in writing to such written

12 comment; and

13 (ii) at the request of such Commis14 sion, publish such comment and response

15 in the Federal Register at the time the de16 termination becomes effective.

17 (7) APPROVAL OF NATIONAL FINANCIAL SERV18 ICES COMMITTEE.—

19 (A) IN GENERAL.—An appropriate Federal

20 banking agency may not issue a regulation or

21 order pursuant to paragraph (3) without the

22 approval of the National Financial Services

23 Committee.

24 (B) UNIFORM STANDARDS.—Any regula25 tion or order subject to the approval of the Na-
64

HR 4182 IH

1 tional Financial Services Committee under

2 paragraph (1) shall be identical for each appro3 priate Federal banking agency, except as other4 wise permitted by such Committee.

5 SEC. 122. SAFEGUARDS RELATING TO SECURITIES AFFILI6 ATES.

7 (a) EXTENSIONS OF CREDIT AND ASSET PURCHASES

8 RESTRICTED.—

9 (1) IN GENERAL.—No depository institution af10 filiated with a securities affiliate shall, directly or in11 directly, do any of the following:

12 (A) Extend credit in any manner to the se13 curities affiliate.

14 (B) Issue a guarantee, acceptance, or let15 ter of credit, including an endorsement or a

16 standby letter of credit, for the benefit of the

17 securities affiliate.

18 (C) Except as provided in paragraph (3),

19 purchase for its own account, or for the account

20 of any subsidiary of such institution, financial

21 assets of the securities affiliate.

22 (2) EXCEPTION FOR CLEARING SECURITIES.—

23 Paragraph (1)(A) shall not apply with respect to an

24 extension of credit by a well capitalized depository
65

HR 4182 IH

1 institution to acquire or sell securities if the follow2 ing conditions are met:

3 (A) The extension of credit is incidental to

4 clearing transactions in those securities through

5 the depository institution.

6 (B) Both the principal of and the interest

7 on the extension of credit are fully secured by

8 those securities.

9 (C) Either—

10 (i) the extension of credit is to be re11 paid before the close of business on the

12 same business day; or

13 (ii) all of the following conditions are

14 satisfied:

15 (I) The securities cannot, in the

16 ordinary course of business, be cleared

17 on that business day.

18 (II) The extension of credit is to

19 be repaid before the close of business

20 on the next business day.

21 (III) Extensions of credit subject

22 to this clause, when aggregated with

23 all other covered transactions between

24 the institution and all affiliated secu25 rities affiliates do not exceed 10 per-
66

HR 4182 IH

1 cent of the institution’s capital stock

2 and surplus.

3 (D) Either—

4 (i) the securities are securities ex5 pressly authorized by section 5136 of the

6 Revised Statutes of the United States as

7 permissible for a national bank to under8 write or deal in; or

9 (ii) the appropriate Federal banking

10 agency for the depository institution per11 mits transactions under this paragraph in

12 securities not described in clause (i) and

13 the securities affiliate provides the deposi14 tory institution with such additional secu15 rity or other assurance of performance, if

16 any, as such agency shall require to pre17 vent such transactions from posing any ap18 preciable risk to the institution.

19 (3) EXCEPTIONS FOR CERTAIN SECURITIES

20 PURCHASED FOR A DEPOSITORY INSTITUTION’S OWN

21 ACCOUNT.—Paragraph (1)(C) shall not apply with

22 respect to purchases at the current market value

23 (based on reliable and regularly available price

24 quotations, including those readily available on elec25 tronic quotation systems) of—
67

HR 4182 IH

1 (A) securities expressly authorized by sec2 tion 5136 of the Revised Statutes of the United

3 States as permissible for a national bank to un4 derwrite or deal in; or

5 (B) securities that—

6 (i) the securities affiliate has been

7 marking to market daily; and

8 (ii) are rated investment grade by at

9 least one nationally recognized statistically

10 rating organization.

11 (4) OTHER EXCEPTIONS.—The appropriate

12 Federal banking agency may make exceptions to

13 paragraph (1) for well capitalized depository institu14 tions it regulates if—

15 (A) the transaction is fully secured in ac16 cordance with section 23A(c) of the Federal Re17 serve Act; and

18 (B) the aggregate amount of covered

19 transactions between the institution and all se20 curities affiliates of the financial services hold21 ing company, excluding transactions permitted

22 under paragraph (2)(C)(i) or (3)(A), does not

23 exceed 10 percent of the institution’s capital

24 stock and surplus.

25 (b) CREDIT ENHANCEMENT RESTRICTED.—
68

HR 4182 IH

1 (1) IN GENERAL.—No depository institution af2 filiated with a securities affiliate shall, directly or in3 directly, extend credit, or issue or enter into a stand4 by letter of credit, asset purchase agreement, indem5 nity, guarantee, insurance, or other facility, for the

6 purpose of enhancing the marketability of a securi7 ties issue underwritten by the securities affiliate.

8 (2) DEFINITION OF TERM BY BOARD.—The ap9 propriate Federal banking agency shall prescribe a

10 definition for the term ‘‘for the purpose of enhanc11 ing the marketability of a securities issue’’ for pur12 pose of paragraph (1).

13 (3) EXCEPTION FOR BANK ELIGIBLE SECURI14 TIES.—Paragraph (1) shall not apply with regard to

15 securities expressly authorized by section 5136 of

16 the Revised Statutes of the United States as permis17 sible for a national bank to underwrite or deal in.

18 (4) APPLICATION TO WELL CAPITALIZED DE19 POSITORY INSTITUTIONS.—

20 (A) IN GENERAL.—A well capitalized de21 pository institution may engage in a transaction

22 described in paragraph (1) if—

23 (i) the depository institution has

24 adopted appropriate limits on exposure on

25 a consolidated basis to any single customer
69

HR 4182 IH

1 whose securities are underwritten by the

2 securities affiliate; and

3 (ii) the institution and its securities

4 affiliate have adopted appropriate proce5 dures, including maintenance of necessary

6 documentary records, to assure that any

7 such extension of credit, standby letter of

8 credit, asset purchase agreement indem9 nity, guarantee, insurance or other facility,

10 is on arm’s length basis.

11 (B) ARM’S LENGTH TRANSACTION DE12 SCRIBED.—An extension of credit may be con13 sidered to be on arm’s length basis if the terms

14 and conditions are substantially the same as

15 those prevailing at the time for comparable

16 transactions involving securities that are not

17 underwritten by the securities affiliate.

18 (C) COMPLIANCE WITH PARAGRAPH (1).—

19 The appropriate Federal banking agency may

20 require, by regulation or order, compliance with

21 paragraph (1) by well capitalized depository in22 stitutions exempt under this paragraph in order

23 to achieve any purpose specified in subsection

24 (k).
70

HR 4182 IH

1 (c) PROHIBITION OF FINANCING PURCHASE OF SE2 CURITY BEING UNDERWRITTEN.—

3 (1) IN GENERAL.—No financial services holding

4 company or subsidiary of a financial services holding

5 company (other than a securities affiliate) shall

6 knowingly extend or arrange for the extension of

7 credit, directly or indirectly, secured by or for the

8 purpose of purchasing any security while, or for 30

9 days after, that security is the subject of a distribu10 tion in which a securities affiliate of that financial

11 services holding company participates as an under12 writer or a member of a selling group.

13 (2) RELIANCE ON ACKNOWLEDGEMENT.—For

14 purposes of paragraph (1), a financial services hold15 ing company or subsidiary may rely on an express

16 written acknowledgement signed by the borrower

17 that the credit is not secured by or for the purpose

18 of purchasing a security described in this subpara19 graph.

20 (3) APPLICATION TO BANK ELIGIBLE SECURI21 TIES.—Paragraph (1) shall not apply with regard to

22 extensions of credit if the securities are securities ex23 pressly authorized by section 5136 of the Revised

24 Statutes of the United States as permissible for a

25 national bank to underwrite or deal in.
71

HR 4182 IH

1 (4) APPLICATION TO WELL CAPITALIZED DE2 POSITORY INSTITUTIONS.—The appropriate Federal

3 banking agency may make exceptions, by regulation

4 or order, to paragraph (1) for an extension of credit,

5 after consultation with and considering the views of

6 the Securities and Exchange Commission.

7 (5) CONSISTENCY WITH THE FEDERAL SECURI8 TIES LAWS.—No provision of this subsection shall be

9 construed as permitting a securities affiliate to ex10 tend or maintain credit, or arrange for an extension

11 of credit, except in compliance with applicable provi12 sions of the Securities Exchange Act of 1934 and

13 the regulations prescribed and interpretations issued

14 under such Act.

15 (d) RESTRICTION ON EXTENDING CREDIT TO MAKE

16 PAYMENTS ON SECURITIES.—

17 (1) IN GENERAL.—No depository institution af18 filiated with a securities affiliate shall, directly or in19 directly, extend credit to an issuer of securities un20 derwritten by such securities affiliate for the purpose

21 of paying the principal of those securities or interest

22 or dividends on those securities.

23 (2) EXCEPTIONS FOR CERTAIN EXTENSIONS OF

24 CREDIT.—Paragraph (1) shall not apply to an exten25 sion of credit for a documented purpose (other than
72

HR 4182 IH

1 paying principal, interest, or dividends) if the tim2 ing, maturity, and other terms of the credit, taken

3 as a whole, are substantially different from those of

4 the underwritten securities.

5 (3) EXCEPTIONS FOR BANK ELIGIBLE SECURI6 TIES.—Paragraph (1) shall not apply with respect to

7 any security expressly authorized by section 5136 of

8 the Revised Statutes of the United States as permis9 sible for a national bank to underwrite or deal in.

10 (4) APPLICATION TO WELL CAPITALIZED DE11 POSITORY INSTITUTIONS.—

12 (A) IN GENERAL.—Paragraph (1) shall not

13 apply with respect to well capitalized depository

14 institutions if—

15 (i) the depository institution has

16 adopted appropriate limits on exposure on

17 a consolidated basis to any single customer

18 whose securities are underwritten by the

19 securities affiliate; and

20 (ii) the depository institution has

21 adopted appropriate procedures, including

22 maintenance of necessary documentary

23 records, to assure that any extension of

24 credit by the depository institution to an

25 issuer for the purpose of paying the prin-
73

HR 4182 IH

1 cipal, interest or dividends on securities

2 underwritten by the securities affiliate is

3 on an arm’s length basis.

4 (B) ARM’S LENGTH TRANSACTION DE5 SCRIBED.—An extension of credit may be con6 sidered to have been made on an arm’s length

7 basis if the terms and conditions are substan8 tially the same as those prevailing at the time

9 for comparable transactions with issuers whose

10 securities are not underwritten by the securities

11 affiliate.

12 (C) COMPLIANCE WITH SUBPARAGRAPH

13 (A).—The appropriate Federal banking agency

14 may require by regulation or order, compliance

15 with paragraph (1) by well capitalized deposi16 tory institutions exempt under this paragraph

17 in order to achieve any purpose specified in

18 subsection (k).

19 (e) COMMON DIRECTORS AND SENIOR EXECUTIVE

20 OFFICERS.—

21 (1) IN GENERAL.—The appropriate Federal

22 banking agency shall, by regulation or order, pre23 scribe the circumstances under which directors and

24 senior executive officers of a securities affiliate may
74

HR 4182 IH

1 serve at the same time as directors or senior execu2 tive officers of any affiliated depository institutions.

3 (2) STANDARDS.—The appropriate Federal

4 banking agency, in issuing any regulation or order

5 pursuant to paragraph (1), shall consider appro6 priate factors including—

7 (A) any burdens imposed by restrictions on

8 director and senior executive officer interlocks;

9 (B) the safety and soundness of depository

10 institutions and securities affiliates;

11 (C) unfair competition in securities activi12 ties;

13 (D) improper exchange of customer infor14 mation; or

15 (E) harm to customers of securities affili16 ates or depository institutions that could rea17 sonably result from director and senior officer

18 interlocks.

19 (3) EXCEPTION FOR SMALL FINANCIAL SERV20 ICES HOLDING COMPANIES.—

21 (A) IN GENERAL.—Notwithstanding para22 graph (1), a director or senior executive officer

23 of a securities affiliate may serve at the same

24 time as a director or senior executive officer of

25 an affiliated depository institution if that insti-
75

HR 4182 IH

1 tution and all affiliated depository institutions

2 have, in the aggregate, total assets of not more

3 than $500,000,000.

4 (B) INFLATION ADJUSTMENT.—The dollar

5 limitation contained in subparagraph (A) shall

6 be adjusted annually after December 31, 1995,

7 by the annual percentage increase in the

8 Consumer Price Index for Urban Wage Earners

9 and Clerical Workers published by the Bureau

10 of Labor Statistics.

11 (4) EXCEPTION FOR CERTAIN FOREIGN AFFILI12 ATES.—Paragraph (1) shall not prohibit a director

13 or senior executive officer of a securities affiliate

14 from serving at the same time as a director or senior

15 executive officer of an entity which—

16 (A) is organized under section 25 or 25A

17 of the Federal Reserve Act;

18 (B) is an affiliate of such securities affili19 ate; and

20 (C) principally engages in business outside

21 the United States.

22 (f) DISCLOSURE REQUIRED BY SECURITIES AFFILI23 ATE.—

24 (1) IN GENERAL.—Pursuant to rules adopted

25 by the Securities and Exchange Commission in con-
76

HR 4182 IH

1 sultation with the appropriate Federal banking agen2 cies, a securities affiliate shall conspicuously disclose

3 in writing to each of its customers at the time a se4 curities account is opened, or within a reasonable

5 time thereafter if it is not practicable to provide

6 such notice at that time, that—

7 (A) securities sold, offered, or rec8 ommended by the securities affiliate—

9 (i) are not deposits;

10 (ii) are not insured by the Federal

11 Deposit Insurance Corporation;

12 (iii) are not guaranteed by an affili13 ated insured depository institution;

14 (iv) are not otherwise an obligation of

15 an insured depository institution (unless

16 such is the case); and

17 (v) with regard to any product that

18 includes any investment component, are

19 subject to investment risks including pos20 sible loss of principal invested;

21 (B) the securities affiliate is not an in22 sured depository institution, and is a corpora23 tion separate from any insured depository insti24 tution; and
77

HR 4182 IH

1 (C) the securities affiliate may be under2 writing or dealing in the securities being sold,

3 offered or recommended, and if so, would have

4 a financial interest in the transaction.

5 (2) FORM OF DISCLOSURE.—The disclosures re6 quired by paragraph (1) shall be made in clear and

7 concise language that—

8 (A) is readily comprehensible to customers

9 of the securities affiliate; and

10 (B) is designed to promote customer un11 derstanding that uninsured investment products

12 are not deposits insured by the Federal Deposit

13 Insurance Corporation.

14 (3) DISCLOSURE AUTHORITY.—Subject to para15 graph (2), the Securities and Exchange Commission,

16 after consultation with the appropriate Federal

17 banking agencies may, in its discretion, prescribe

18 disclosures in addition to the disclosures prescribed

19 by paragraph (1).

20 (g) DISCLOSURE REQUIRED BY DEPOSITORY INSTI21 TUTIONS.—

22 (1) IN GENERAL.—Pursuant to rules adopted

23 jointly by the appropriate Federal banking agencies

24 in consultation with the Securities and Exchange

25 Commission, no insured depository institution shall
78

HR 4182 IH

1 knowingly express any opinion on the value of, or

2 the advisability of purchasing or selling, nonbanking

3 products (as defined by the appropriate Federal

4 banking agency) sold by the insured depository insti5 tution or any affiliate of an insured depository insti6 tution unless the insured depository institution con7 spicuously discloses in writing to the customer

8 that—

9 (A) the insured depository institution or

10 affiliate (whichever is applicable) is selling the

11 nonbanking product and has a financial interest

12 in the transaction (if such is the case);

13 (B) the nonbanking products—

14 (i) are not deposits;

15 (ii) are not insured by the Federal

16 Deposit Insurance Corporation;

17 (iii) are not guaranteed by the institu18 tion or any other affiliated insured deposi19 tory institution;

20 (iv) are not otherwise an obligation of

21 an insured depository institution (unless

22 such is the case); and

23 (v) with regard to any nonbanking

24 product that includes any investment com25 ponent, are subject to investment risks in-
79

HR 4182 IH

1 cluding possible loss of principal invested;

2 and

3 (C) an affiliate, if involved, is not an in4 sured depository institution (unless such is the

5 case), and is a corporation separate from any

6 insured depository institution (unless such is

7 not the case).

8 (2) FORM OF DISCLOSURE.—The disclosures re9 quired by paragraph (1) shall be made in clear and

10 concise language that—

11 (A) is readily comprehensible to customers

12 of the insured depository institution, and

13 (B) is designed to promote customer un14 derstanding that nonbanking products are not

15 deposits insured by the Federal Deposit Insur16 ance Corporation.

17 (3) CUSTOMER ACKNOWLEDGMENT OF DISCLO18 SURE.—

19 (A) IN GENERAL.—Whenever any insured

20 depository institution or securities affiliate

21 opens an account for the purpose of selling a

22 nondeposit investment product or products to a

23 customer, such insured depository institution or

24 securities affiliate, as the case may be, shall ob25 tain a one-time acknowledgment of receipt by
80

HR 4182 IH

1 the customer of such disclosures, including the

2 date of receipt with the customer’s name, ad3 dress, and the account number.

4 (B) ONE-TIME ACKNOWLEDGMENT.—The

5 one-time written acknowledgment required by

6 subparagraph (A) and obtained with respect to

7 one account from a customer shall satisfy the

8 requirement with respect to all other investment

9 accounts opened by that customer at that de10 pository institution or securities affiliate.

11 (C) TIMING OF ACKNOWLEDGMENT.—The

12 one-time acknowledgment required by subpara13 graph (A) must be obtained within a reasonable

14 time after the account is opened.

15 (D) SPECIAL RULE FOR ACCREDITED IN16 VESTORS.—This paragraph shall not apply to

17 any customer who is, or meets the requirements

18 for, an accredited investor (as defined in section

19 2(15) of the Securities Act of 1933).

20 (4) DISCLOSURE AUTHORITY.—Subject to para21 graph (2), the appropriate Federal banking agencies

22 may jointly prescribe, after consultation with the Se23 curities and Exchange Commission, disclosures in

24 addition to the disclosures required by paragraph

25 (1).
81

HR 4182 IH

1 (h) UNDERWRITING SECURITIES REPRESENTING OB2 LIGATIONS ORIGINATED BY AFFILIATE RESTRICTED.—A

3 securities affiliate shall not underwrite securities secured

4 by or representing an interest in mortgages or other obli5 gations originated or purchased by an affiliated depository

6 institution or subsidiary of such an institution—

7 (1) unless those securities—

8 (A) are rated by at least one unaffiliated,

9 nationally recognized statistical rating organiza10 tion;

11 (B) are issued or guaranteed by the Fed12 eral Home Loan Mortgage Corporation, the

13 Federal National Mortgage Association, or the

14 Government National Mortgage Association; or

15 (C) represent interests in securities de16 scribed in subparagraph (B); or

17 (2) except as permitted by the appropriate Fed18 eral banking agency.

19 (i) RECIPROCAL ARRANGEMENTS PROHIBITED.—No

20 financial services holding company and no subsidiary of

21 a financial services holding company may enter into any

22 agreement, understanding, or other arrangement under

23 which—

24 (1) One financial services holding company (or

25 subsidiary of that financial services holding com-
82

HR 4182 IH

1 pany) agrees to engage in a transaction with, or on

2 behalf of, another financial services holding company

3 (or subsidiary of that financial services holding com4 pany), in exchange for

5 (2) the agreement of the second financial serv6 ices holding company referred to in paragraph (1)

7 (or a subsidiary of that financial services holding

8 company) to engage in any transaction with, or on

9 behalf of, the first financial services holding com10 pany referred to in such paragraph (or any subsidi11 ary of that financial services holding company), for

12 the purpose of evading any requirement or restric13 tion of Federal law on transactions between, or for

14 the benefit of, affiliates of financial services holding

15 companies.

16 (j) SAFEGUARDS APPLY TO CERTAIN SUBSIDI17 ARIES.—Except as provided in this section—

18 (1) SECURITIES AFFILIATE.—No subsidiary of

19 a securities affiliate may do anything that this sec20 tion prohibits the securities affiliate from doing.

21 (2) DEPOSITORY INSTITUTION.—No subsidiary

22 of a depository institution may do anything that this

23 subsection prohibits the depository institution from

24 doing.
83

HR 4182 IH

1 (k) AUTHORITY TO MODIFY AND IMPOSE ADDI2 TIONAL SAFEGUARDS; INTERPRETIVE AUTHORITY.—

3 (1) IN GENERAL.—The appropriate Federal

4 banking agency may, by regulation or order—

5 (A) adopt additional limitations, restric6 tions or conditions on relationships or trans7 actions among depository institutions, their af8 filiates, and their customers; and

9 (B) make any modification to any limita10 tion, restriction, or condition imposed under

11 this section on relationships or transactions

12 among depository institutions, the affiliates of

13 depository institutions, and the customers of

14 such institutions or affiliates, including modi15 fications in addition to those expressly provided

16 for in this section.

17 (2) STANDARDS.—The appropriate Federal

18 banking agency may not exercise authority under

19 paragraph (1) unless such agency finds that such

20 action is consistent with the purposes of this act, in21 cluding—

22 (A) the avoidance of any significant risk to

23 the safety and soundness of depository institu24 tions or the Federal deposit insurance funds;
84

HR 4182 IH

1 (B) the enhancement of the financial sta2 bility of financial services holding companies;

3 (C) the prevention of the subsidization of

4 securities affiliates by depository institutions;

5 (D) the avoidance of conflicts of interest or

6 other abuses; and

7 (E) the application of the principle of na8 tional treatment and equality of competitive op9 portunity between securities affiliates owned or

10 controlled by domestic financial services holding

11 companies and securities affiliates owned or

12 controlled by foreign banks operating in the

13 United States.

14 (3) BIENNIAL REVIEW.—Beginning 2 years

15 after the effective date of the Depository Institution

16 Affiliation Act, the appropriate Federal banking

17 agency shall, on a biennial basis—

18 (A) review all restrictions established pur19 suant to paragraph (1) to determine whether

20 any such restrictions are required any longer to

21 carry out the purposes of this Act; and

22 (B) modify or eliminate any such restric23 tion that such agency determines is no longer

24 required to carry out the purposes of this Act.

25 (l) COMPLIANCE PROGRAMS REQUIRED.—
85

HR 4182 IH

1 (1) IN GENERAL.—Each appropriate Federal

2 banking agency and the Securities and Exchange

3 Commission shall establish a program for—

4 (A) sharing information, including reports

5 of examinations, concerning compliance with

6 this section or the amendments made by title

7 III of the Depository Institution Affiliation and

8 Thrift Charter Conversion Act, by—

9 (i) brokers, dealers, investment advis10 ers, or investment companies that are reg11 istered with the Securities and Exchange

12 Commission and that are affiliated with

13 depository institutions, or are separately

14 identifiable departments or divisions of de15 pository institutions registered as invest16 ment advisers; and

17 (ii) depository institutions and their

18 affiliates;

19 (B) enforcing compliance with this section

20 and the amendments made by this subtitle and

21 paragraphs (4) and (5) of section 3(a) of the

22 Securities Exchange Act of 1934 by entities

23 under its supervision; and
86

HR 4182 IH

1 (C) responding to any complaints from

2 customers about inappropriate cross-marketing

3 of securities products or inadequate disclosure.

4 (2) DATA COLLECTION.—

5 (A) IN GENERAL.—The appropriate Fed6 eral banking agencies, after consultation with

7 and consideration of the views of the Securities

8 and Exchange Commission, shall (except as oth9 erwise provided by the appropriate Federal

10 banking agency after such consultation) require

11 any depository institution that has effected se12 curities transactions pursuant to any exception

13 enumerated in paragraphs (4)(C) and (5)(D) of

14 section 3(a) of the Securities Exchange Act of

15 1934 to identify the exceptions relied upon and

16 to submit such information necessary to mon17 itor compliance under such paragraphs.

18 (B) COMMISSION ACCESS.—The appro19 priate Federal banking agency shall make any

20 information referred to in subparagraph (A)

21 available to the Securities and Exchange Com22 mission, upon the request of the Commission.

23 (C) COMPLIANCE.—In implementing the

24 provisions of this paragraph, the appropriate

25 Federal banking agencies shall ensure that any
87

HR 4182 IH

1 information requests to depository institutions

2 take into account the size and activities of the

3 institutions and do not cause undue reporting

4 burdens.

5 (3) COMMISSION’S ENFORCEMENT AUTHOR6 ITY.—Without limiting in any way the authority of

7 the appropriate Federal banking agencies under this

8 section, the Securities and Exchange Commission

9 shall have the authority to enforce provision of this

10 section against a securities affiliate as if such provi11 sion were a provision of the Securities Exchange Act

12 of 1934 to the extent that the provision applies with

13 respect to the conduct or activities of the securities

14 affiliate.

15 (4) EXAMINATION REPORTS.—

16 (A) IN GENERAL.—The appropriate Fed17 eral banking agencies shall, to the fullest extent

18 possible, use the reports of examination of any

19 broker, dealer, investment adviser, or invest20 ment company made by or on behalf of the Se21 curities and Exchange Commission and reports

22 made by or on behalf of a registered securities

23 association or national securities exchange, and

24 shall defer to such examinations for compliance

25 with the Federal securities laws.
88

HR 4182 IH

1 (B) COMPLIANCE WITH SECTION 122 SAFE2 GUARDS.—The appropriate Federal banking

3 agencies shall—

4 (i) to the fullest extent possible, use

5 the reports of examination of any securi6 ties affiliate made by the appropriate Fed7 eral banking agency for such affiliate; and

8 (ii) defer to such examinations for

9 compliance with the provisions of this sec10 tion.

11 (5) INTERPRETATIONS OF THE FEDERAL SECU12 RITIES LAWS.—The appropriate Federal banking

13 agencies shall defer to the Securities and Exchange

14 Commission regarding all interpretations and en15 forcement of the Federal securities laws relating to

16 the application of the Federal securities laws to the

17 activities and conduct of brokers, dealers, investment

18 advisers, and investment companies.

19 (6) NOTICE OF CERTAIN ACTIONS BY SEC.—

20 The Securities and Exchange Commission shall give

21 notice to the appropriate Federal banking agency

22 upon the commencement of any disciplinary or law

23 enforcement proceedings by the Commission and a

24 copy of any order entered by the Commission

25 against—
89

HR 4182 IH

1 (A) any broker, dealer, or investment ad2 viser that—

3 (i) is registered with the Securities

4 and Exchange Commission; and

5 (ii) is affiliated with, or is a sepa6 rately identifiable department or division

7 of, a depository institution;

8 (B) any investment company registered

9 with the Securities and Exchange Commission

10 that is an affiliate of or is advised by an invest11 ment adviser affiliated with a depository institu12 tion or by a separately identifiable department

13 or division of a depository institution that is a

14 registered investment adviser; or

15 (C) any financial services holding company,

16 depository institution, or subsidiary of such

17 company or institution, if the proposed action

18 relates to this section or the amendments made

19 by title III of the Depository Institution Affili20 ation and Thrift Charter Conversion Act.

21 (7) NOTICE OF CERTAIN ACTIONS BY APPRO22 PRIATE FEDERAL BANKING AGENCIES.—Upon the

23 commencement of any disciplinary or law enforce24 ment proceedings to enforce the provisions of this

25 section by an appropriate Federal banking agency
90

HR 4182 IH

1 against any broker, dealer, investment adviser, or in2 vestment company that is registered under the Fed3 eral securities laws and is affiliated with a deposi4 tory institution or is a separately identifiable depart5 ment or division of a depository institution, the ap6 propriate Federal banking agency shall give notice to

7 the Securities and Exchange Commission of the pro8 posed action.

9 (8) IMMEDIATE ACTION ALLOWED BEFORE NO10 TICE.—The notice required under paragraph (6) or

11 (7) may be provided promptly after action by the Se12 curities and Exchange Commission or the appro13 priate Federal banking agency, if—

14 (A) the Commission determines that the

15 protection of investors requires immediate ac16 tion by the Commission and prior notice under

17 paragraph (6) is not practical under the cir18 cumstances; or

19 (B) the appropriate Federal banking agen20 cy determines that concerns for the safety and

21 soundness of a depository institution or its affil22 iate require immediate action by the agency and

23 prior notice under (7) is not practical under the

24 circumstances.
91

HR 4182 IH

1 (9) COORDINATED ENFORCEMENT ACTION.—

2 The Securities and Exchange Commission and the

3 appropriate Federal banking agencies shall, to the

4 extent practicable, coordinate supervisory actions

5 based on applicable law where the actions are based

6 on the same or related events or practices.

7 (10) INVESTMENT COMPANIES NOT AFFILIATED

8 WITH A DEPOSITORY INSTITUTION.—The appro9 priate Federal banking agency shall not have au10 thority under this section or any other provision of

11 law to inspect or examine any investment company

12 registered under the Federal securities laws that is

13 not—

14 (A) affiliated with a depository institution;

15 or

16 (B) advised by an investment adviser affili17 ated with a depository institution or by a sepa18 rately identifiable department or division of a

19 depository institution that is a registered invest20 ment adviser.

21 (11) DEFINITION.—For purposes of this sub22 section, the term ‘‘Federal securities laws’’ means

23 the provisions of Federal law governing securities ac24 tivities that are within the jurisdiction of the Securi25 ties and Exchange Commission under the Securities
92

HR 4182 IH

1 Act of 1933, the Securities Exchange Act of 1934,

2 the Investment Company Act of 1940, the Invest3 ment Advisers Act of 1940, and the Trust Indenture

4 Act of 1939.

5 (m) FOREIGN BANK FIREWALLS.—

6 (1) IN GENERAL.—A branch, agency, or com7 mercial lending company that is operated by a for8 eign bank that is a financial services holding com9 pany shall not be subject to the restrictions of any

10 subsection of this section, other than subsections (k)

11 and (l), if—

12 (A) such branch, agency, or commercial

13 lending company accepts no deposits in the

14 United States that are insured under the Fed15 eral Deposit Insurance Act;

16 (B) such foreign bank meets risk-based

17 capital standards comparable to the capital

18 standards required for a wholesale financial in19 stitution, giving due regard to the principle of

20 national treatment and equality of competitive

21 opportunity; and

22 (C) the home country of such foreign bank

23 satisfies the national treatment standard de24 scribed in Section 102(l)(3).
93

HR 4182 IH

1 (2) APPLICABILITY OF SUBSECTION (K) TO FOR2 EIGN BANKS.—Any limitation, restriction, condition,

3 or modification adopted under subsection (k) may be

4 applied by the appropriate Federal banking agency

5 to—

6 (A) a foreign bank that operates a branch,

7 agency, or commercial lending company de8 scribed in paragraph (1) (and any company

9 that owns or controls such foreign bank);

10 (B) any branch, agency or commercial

11 lending company operated by such foreign bank

12 in the United States; or

13 (C) any other affiliate of such foreign bank

14 in the United States; if such limitation, restric15 tion, condition, or modification is applied by

16 regulation or order of general applicability

17 under subsection (n)(1) to wholesale financial

18 institutions and their securities affiliates, sub19 ject to such modifications, conditions, or exemp20 tions as the appropriate Federal banking agen21 cy of such wholesale financial institution deems

22 appropriate, giving due regard to the principle

23 of national treatment and equality of competi24 tive opportunity.
94

HR 4182 IH

1 (n) FIREWALLS APPLICABLE TO WHOLESALE FI2 NANCIAL INSTITUTIONS AND NATIONAL MARKET LEND3 ING INSTITUTIONS.—

4 (1) IN GENERAL.—A wholesale financial institu5 tion, and transactions between a wholesale financial

6 institution and its securities affiliate, shall not be

7 subject to the provisions of this section, except that

8 a wholesale financial institution and its securities af9 filiate shall be subject to subsections (k) and (l) in

10 the same manner and to the same extent such sub11 sections would apply if the wholesale financial insti12 tution were an insured depository institution.

13 (2) PROHIBITION ON EVASION OF FIREWALLS

14 BY AFFILIATED INSURED DEPOSITORY INSTITU15 TIONS.—An insured depository institution that is af16 filiated with a wholesale financial institution shall

17 not evade any requirement or restriction imposed by

18 this section by engaging in transactions or arrange19 ments with its affiliated wholesale financial institu20 tion.

21 (3) SIMILAR TREATMENT FOR NATIONAL MAR22 KET LENDING INSTITUTIONS.—A national market

23 lending institution, as defined in section 5158 of the

24 Revised Statutes of the United States, that is con25 trolled by a financial services holding company shall
95

HR 4182 IH

1 be subject to this section in the same manner and

2 to the same extent as a wholesale financial institu3 tion.

4 (o) AUTHORITY OF NATIONAL FINANCIAL SERVICES

5 COMMITTEE.—

6 (1) IN GENERAL.—Except for rules issued pur7 suant to subsections (f) or (g), no rule, regulation,

8 or order authorized or required by this section shall

9 be issued without the approval of the National Fi10 nancial Services Committee.

11 (2) UNIFORM STANDARDS.—Any regulation,

12 rule, or order subject to the approval of the National

13 Financial Services Committee under paragraph (1)

14 shall be identical for each appropriate Federal bank15 ing agency, except as otherwise permitted by such

16 Committee, taking into account existing require17 ments, coordination of new requirements, minimiza18 tion of duplicative regulation, the degree of uniform19 ity between regulation of securities affiliates or in20 vestment companies affiliated with or advised by de21 pository institutions or their affiliates and other

22 broker dealers or investment companies, and an

23 analysis of any of the benefits to be obtained by any

24 unique regulatory burdens placed on securities affili-
96

HR 4182 IH

1 ates or investment companies affiliated with or ad2 vised by depository institutions or their affiliates.

3 SEC. 123. JOINT STANDARDS RELATING TO RETAIL SALES

4 OF CERTAIN NONDEPOSIT INVESTMENT

5 PRODUCTS.

6 (a) IN GENERAL.—The National Financial Services

7 Committee shall prescribe standards applicable to any de8 pository institution which—

9 (1) is not registered as a broker under the Se10 curities Exchange Act of 1934;

11 (2) effects retail transactions in securities, in12 cluding securities issued by an investment company

13 or annuities; and

14 (3) is affiliated with a financial services holding

15 company.

16 (b) SCOPE OF STANDARDS.—The standards required

17 under paragraph (1) with respect to retail sales of securi18 ties and annuities referred to in such paragraph shall, at

19 a minimum, establish requirements with respect to—

20 (1) sales practices;

21 (2) disclosures and advertising in connection

22 with transactions in such securities and annuities,

23 including—

24 (A) the content, form, and timing of any

25 such disclosure; and
97

HR 4182 IH

1 (B) disclaimers concerning the noninsured

2 status of the security or annuity;

3 (3) the compensation of sales personnel with re4 spect to referrals or transactions;

5 (4) the training of and qualifications for per6 sonnel involved in such transactions, including train7 ing in making an accurate judgment about the suit8 ability of a particular investment product for a pro9 spective customer; and

10 (5) the setting in which and the circumstances

11 under which transactions may be effected, and refer12 rals made, by sales personnel with respect to such

13 securities and annuities.

14 (c) COMPARABILITY REQUIREMENT.—The standards

15 required under paragraph (1) shall be comparable to the

16 standards applicable to brokers and dealers registered

17 under the Securities Exchange Act of 1934 unless the Na18 tional Financial Services Committee determines that im19 plementation of comparable standards is not necessary or

20 appropriate for the maintenance of fair and orderly mar21 kets or the protection of investors or is not in the public

22 interest.
98

HR 4182 IH

1 Subtitle C—Insurance and Real Estate Devel2 opment Activities of Financial Services

3 Holding Companies

4 SEC. 131. LIMITATION ON INSURANCE UNDERWRITING AND

5 REAL ESTATE DEVELOPMENT ACTIVITIES OF

6 DEPOSITORY INSTITUTIONS.

7 (a) IN GENERAL.—No depository institution that is

8 an affiliate of a financial services holding company shall

9 directly engage in—

10 (1) insurance underwriting (other than credit11 related insurance udnerwriting); or

12 (2) real estate investment or development, ex13 cept to the extent that such activities are performed

14 in relation to the premises of the depository institu15 tion or in connection with securing or collecting a

16 debt previously contracted in good faith, or would be

17 authorized for a national bank under section 5137

18 of the Revised Statutes of the United States or the

19 first section of the Act of September 28, 1962 (12

20 U.S.C. 92a).

21 (b) CONSTRUCTION.—Nothing contained in this sec22 tion shall be construed to prohibit or impede—

23 (1) a financial services holding company or any

24 affiliate of a financial services holding company
99

HR 4182 IH

1 other than a depository institution from engaging in

2 any of the activities set forth in paragraph (1); or

3 (2) any employee of a depository institution

4 that is an affiliate of a financial services holding

5 company from promoting or advertising products or

6 services of an affiliate of such insured depository in7 stitution that engages in any of such activities.

8 SEC. 132. ACQUISITION OF PREEXISTING INSURANCE AGEN9 CY BY BANK HOLDING COMPANIES.

10 (a) IN GENERAL.— No bank holding company which

11 becomes a financial services holding company and no fi12 nancial services holding company which did not at any

13 time prior to becoming such a holding company, directly

14 or indirectly, engage in insurance agency activities other

15 than activities generally permissible for bank holding com16 panies under section 4(c)(8) of the Bank Holding Com17 pany Act of 1956, shall commence any insurance agency

18 activities not generally permissible for bank holding com19 panies under section 4(c)(8) of the Bank Holding Com20 pany Act of 1956, unless such activities are conducted

21 through an existing insurance agency acquired directly or

22 indirectly by such financial services holding company or

23 through any successor to such insurance agency, and un24 less such acquired insurance agency shall have been ac-
100

HR 4182 IH

1 tively engaged in such insurance activities during the 2-

2 year period preceding the date of such acquisition.

3 SEC. 133. EXISTING CONTRACTS.

4 Nothing in sections 131 or 132 shall require the

5 breach of any contract entered into before the date of en6 actment of this Act.

7 TITLE II—CONFORMING AMENDMENTS TO

8 OTHER LAWS FOR FINANCIAL SERV9 ICES HOLDING COMPANIES

10 SEC. 201. EXEMPTION OF FINANCIAL SERVICES HOLDING

11 COMPANIES FROM THE BANK HOLDING COM12 PANY ACT OF 1956.

13 Section 2(c)(2) of the Bank Holding Company Act

14 of 1956 (12 U.S.C. 1841(c)(2)) is amended by adding at

15 the end the following new subparagraphs:

16 ‘‘(K) An insured bank, as defined in sec17 tion 3 of the Federal Deposit Insurance Act,

18 that is controlled by a financial services holding

19 company, as defined in section 102(a) of the

20 Financial Services Holding Company Act.

21 ‘‘(L) A wholesale financial institution, as

22 defined in section 102(i) of the Financial Serv23 ices Holding Company Act, that is controlled by

24 a financial services holding company, as defined

25 in section 102(a) of such Act.’’.
101

HR 4182 IH

1 SEC. 202. AMENDMENT TO THE FEDERAL RESERVE ACT.

2 Section 23B(b)(1)(B) of the Federal Reserve Act (12

3 U.S.C. 371c–1(b)(1)(B)) is amended by inserting ‘‘and for

4 30 days thereafter’’ after ‘‘during the existence of any un5 derwriting or selling syndicate’’.

6 SEC. 203. AMENDMENTS TO THE BANKING ACT OF 1933.

7 (a) SECTION 20.—Section 20 of the Banking Act of

8 1933 (12 U.S.C. 377) is amended by inserting after the

9 first undesignated paragraph the following: ‘‘The provi10 sions of this section shall not apply to a financial services

11 holding company or any of its affiliates, as such terms

12 are defined in section 102 of the Financial Services Hold13 ing Company Act.’’

14 (b) SECTION 32.—Section 32 of the Banking Act of

15 1933 (12 U.S.C. 78) is amended by adding at the end

16 the following: ‘‘This section shall not apply so as to pro17 hibit an officer, director, or employee of a securities affili18 ate (as defined in section 102(r) of the Financial Services

19 Holding Company Act) from serving at the same time as

20 an officer, director, or employee of a member bank affili21 ated with the securities affiliate pursuant to such Act.

22 This section shall not apply so as to prohibit an officer,

23 director, or employee of an investment company registered

24 under the Investment Company Act of 1940 or an invest25 ment adviser registered under the Investment Advisers

26 Act of 1940 from serving at the same time as an officer,
102

HR 4182 IH

1 director, or employee of a member bank that is affiliated

2 with a financial services holding company (as defined in

3 section 102(a) of the Financial Services Holding Company

4 Act).’’.

5 SEC. 204. AMENDMENTS TO THE FEDERAL DEPOSIT INSUR6 ANCE ACT.

7 (a) SECTION 7.—Section 7(j) of the Federal Deposit

8 Insurance Act (12 U.S.C. 1817(j))) is amended—

9 (1) in paragraph (8), by striking subparagraph

10 (B) and inserting the following:

11 ‘‘(B) the term ‘control’ means the power,

12 directly or indirectly, to direct the management

13 or policies of a company, or to vote 25 percent

14 or more of any class of voting securities of a

15 company, except that no company shall be

16 deemed to control or to have acquired control of

17 any other company by virtue of its ownership of

18 the voting securities of such other company—

19 ‘‘(i) acquired or held in an agency,

20 trust, or other fiduciary capacity;

21 ‘‘(ii) acquired or held in connection

22 with or incidental to—

23 ‘‘(I) the underwriting of securi24 ties if such securities are held only for
103

HR 4182 IH

1 such person of time as will permit the

2 sale thereof on a reasonable basis; or

3 ‘‘(II) market making, dealing,

4 trading, brokerage, or other securities5 related activities and not with a view

6 to acquiring, exercising, or transfer7 ring any control over the management

8 or policies of such company; or

9 ‘‘(iii) acquired in securing or collect10 ing a debt previously contracted in good

11 faith, until 2 years after the date of acqui12 sition, except that no company formed for

13 the sole purpose of participating in a proxy

14 solicitation is in control of a company by

15 virtue of its acquisition of voting rights

16 with respect to shares of such company ac17 quired in the course of such solicitation.’’;

18 and

19 (2) by adding at the end the following new

20 paragraph:

21 ‘‘(19) DEFINITION.—For purposes of this sub22 section, the term ‘insured depository institution’

23 shall include—

24 ‘‘(A) any ‘bank holding company’, as that

25 term is defined in section 2 of the Bank Hold-
104

HR 4182 IH

1 ing Company Act of 1956, which has control of

2 any insured bank (as defined in that section 2),

3 and the appropriate Federal banking agency in

4 the case of a bank holding company shall be the

5 Board of Governors of the Federal Reserve Sys6 tem; and

7 ‘‘(B) any ‘financial services holding com8 pany’, as that term is defined in section 102(a)

9 of the Financial Services Holding Company

10 Act, which has control of any such insured

11 bank, and the appropriate Federal banking

12 agency in the case of a financial services hold13 ing company shall be the appropriate Federal

14 banking agency of the lead depository institu15 tion (as defined in section 102(h) of the Finan16 cial Services Holding Company Act) of the fi17 nancial services holding company.

18 (b) SECTION 18.—Section 18(j)(1)(A) of the Federal

19 Deposit Insurance Act (12 U.S.C. 1828(j)(1)(A)) is

20 amended by striking ‘‘Sections’’ and inserting ‘‘Subject to

21 section 104(a)(2) of the Financial Services Holding Com22 pany Act, sections’’.

23 (c) APPROPRIATE FEDERAL BANKING AGENCY.—

24 (1) STATE MEMBER WHOLESALE FINANCIAL IN25 STITUTIONS.—Section 3(g)(2)(A) of the Federal De-
105

HR 4182 IH

1 posit Insurance Act (12 U.S.C. 1813 (q)(2)(A)) is

2 amended to read as follows:

3 ‘‘(A) any State member insured bank (ex4 cept a District bank) and State member whole5 sale financial institution as authorized pursuant

6 to section 9B of the Federal Reserve Act.’’.

7 (2) NATIONAL WHOLESALE FINANCIAL INSTI8 TUTION.—Section 3(g)(1) of the Federal Deposit In9 surance Act (12 U.S.C. 1813(q)(1)) is amended by

10 inserting ‘‘(including any national wholesale finan11 cial institution and any national market funded lend12 ing institution, as authorized pursuant to sections

13 5136B and 5158 of the Revised Statutes of the

14 United States)’’.

15 (d) SECURITIES COMPANY AFFILIATIONS OF FDIC–

16 INSURED BANKS.—Section 18 of the Federal Deposit In17 surance Act (12 U.S.C. 1828) is amended by adding at

18 the end thereof the following new subsection:

19 ‘‘(s) SECURITIES AFFILIATIONS OF BANKS.—

20 ‘‘(1) IN GENERAL.—A bank shall not be an af21 filiate of any company that, directly or indirectly,

22 acts as an underwriter or dealer of any security,

23 other than—

24 ‘‘(A) a bank;
106

HR 4182 IH

1 ‘‘(B) a securities affiliate as defined in sec2 tion 102(r) of the Financial Services Holding

3 Company Act; or

4 ‘‘C) a company that underwrites or deals

5 only in securities that are described in section

6 121 of the Depository Institution Affiliation

7 and Thrift Charter Conversion Act.

8 ‘‘(2) EXCEPTIONS.—

9 ‘‘(A) CERTAIN BANKS NOT INCLUDED.—

10 For purposes of this subsection, the term ‘bank’

11 does not include—

12 ‘‘(i) an insured bank described in sub13 paragraph (D), (F), or (H) of section

14 2(c)(2) of the Bank Holding Company Act

15 of 1956; and

16 ‘‘(ii) a Federal branch or an insured

17 branch (as defined in section 3 of the Fed18 eral Deposit Insurance Act).

19 ‘‘(B) AFFILIATIONS WITH EDGE ACT AND

20 AGREEMENT CORPORATIONS.—Paragraph (1)

21 shall not apply with respect to the affiliation of

22 a bank with a company held pursuant to section

23 25 or 25A of the Federal Reserve Act or section

24 4(c)(13) of the Bank Holding Company Act of

25 1956.
107

HR 4182 IH

1 ‘‘(3) GRANDFATHER PROVISION.—This sub2 section shall not apply with respect to—

3 ‘‘(A) an affiliation between a bank and a

4 company that underwrites or deals in securities,

5 provided that—

6 ‘‘(i) the affiliation is authorized pur7 suant to an order issued by the Board of

8 Governors of the Federal Reserved System

9 under section 4(c)(8) of the Bank Holding

10 Company Act of 1956; and

11 ‘‘(ii) such company complies with the

12 limitations, restrictions, and conditions, in13 cluding the limitation on the revenue that

14 may be derived from underwriting or deal15 ing activities, that were generally applica16 ble to companies that, as of January 1,

17 1996, were subject to orders described in

18 clause (i);

19 ‘‘(B) any other lawful affiliation that ex20 isted on January 1, 1996; or

21 ‘‘(C) any new affiliation by an insured that

22 has an affiliation that would be prohibited if the

23 affiliation were not covered by subparagraph

24 (B).
108

HR 4182 IH

1 ‘‘(4) DEFINITIONS.—For purposes of this sub2 section, the following definitions shall apply:

3 ‘‘(A) DEALER.—The term ‘dealer’ has the

4 meaning given to such term in section 3(a)(5)

5 of the Securities Exchange Act of 1934.

6 ‘‘(B) SECURITY.—The term ‘security’ has

7 the meaning given to such term in section

8 121(c) of the Financial Services Holding Com9 pany Act.

10 ‘‘(C) UNDERWRITER.—The term ‘under11 writer’ has the meaning given to such term in

12 section 2(11) of the Securities Act of 1933.’’.

13 SEC. 205. AMENDMENT TO THE COMMUNITY REINVEST14 MENT ACT.

15 Section 803(3) of the Community Reinvestment Act

16 of 1977 (12 U.S.C. 2902(3)) is amended—

17 (1) by inserting ‘‘or notice, as appropriate’’

18 after ‘‘an application’’;

19 (2) in subparagraph (E), by striking ‘‘or’’ at

20 the end;

21 (3) in subparagraph (F), by striking the period

22 at the end and inserting ‘‘; or’’; and

23 (4) by adding at the end the following new sub24 paragraph:
109

HR 4182 IH

1 ‘‘(G) the acquisition of an insured deposi2 tory institution requiring prior notice under sec3 tion 103 of the Financial Services Holding

4 Company Act.’’.

5 SEC. 206. AMENDMENT TO THE FEDERAL POWER ACT.

6 Section 305(b) of the Federal Power Act shall not

7 apply to any person now holding, or proposing to hold,

8 at the same time the position of officer or director of a

9 public utility and the position of officer or director of a

10 bank, trust company, banking association, or firm per11 mitted by the Financial Services Holding Company Act

12 to underwrite or participate in the marketing of securities

13 of the public utility for which the person serves, or pro14 poses to serve, as an officer of director.

15 SEC. 207. AMENDMENT TO THE RIGHT TO FINANCIAL PRI16 VACY ACT.

17 Section 1112(e) of the Right to Financial Privacy Act

18 (12 U.S.C. 3412(e)) is amended as follows—

19 (1) by striking ‘‘this title’’ and inserting ‘‘law’’;

20 and

21 (2) by inserting ‘‘, examination reports,’’ after

22 ‘‘financial records’’.
110

HR 4182 IH

1 SEC. 208. AMENDMENTS TO THE INTERNATIONAL BANKING

2 ACT.

3 (a) EXEMPTION FROM PROVISIONS OF BANK HOLD4 ING COMPANY ACT FOR FOREIGN BANKS QUALIFYING AS

5 FINANCIAL SERVICES HOLDING COMPANIES.—Section

6 8(a) of the International Banking Act (12 U.S.C.

7 32016(a)) is amended by adding at the end by striking

8 ‘‘provisions.’’ and inserting the following: ‘‘provisions, ex9 cept that any such foreign bank or company that qualifies

10 and elects to be treated as a financial services holding

11 company under the Financial Services Holding Company

12 Act, and any affiliate of such financial services holding

13 company, shall not be so subject to the provisions of the

14 Bank Holding Company Act of 1956.’’.

15 (b) AUTHORITY TO TERMINATE GRANDFATHER

16 RIGHTS.—Section 8(c) of the International Banking Act

17 of 1978 (12 U.S.C. 3106(c)) is amended by adding at the

18 end the following new paragraph:

19 ‘‘(3) PARITY IN CONDUCT OF AUTHORIZED SE20 CURITIES ACTIVITIES.—

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

22 provisions of paragraph (1) or any other provi23 sion of law, any authority conferred under this

24 subsection on any foreign bank or company

25 with respect to securities activities authorized

26 for bank holding companies in the United
111

HR 4182 IH

1 States shall terminate 30 days after such for2 eign bank or company becomes a financial serv3 ices holding company under the Financial Serv4 ices Holding Company Act.’’.

5 TITLE III—FUNCTIONAL REGULATION

6 AMENDMENTS TO SECURITIES LAWS

7 FOR FINANCIAL SERVICES HOLDING

8 COMPANIES

9 Subtitle A—Broker Dealer Provisions

10 SEC. 301. DEFINITION OF BROKER.

11 Section 3(a)(4) of the Securities Exchange Act of

12 1934 (15 U.S.C. 78c(a)(4)) is amended to read as follows:

13 ‘‘(4) BROKER.—

14 ‘‘(A) IN GENERAL.—The term ‘broker’

15 means any person engaged in the business of

16 effecting transactions in securities for the ac17 count of others.

18 ‘‘(B) EXCLUSION OF BANKS.—The term

19 ‘broker’ does not include a bank unless such

20 bank is affiliated with a financial services hold21 ing company, as defined in section 102(a) of

22 the Financial Services Holding Company Act

23 and—
112

HR 4182 IH

1 ‘‘(i) publicly solicits the business of

2 effecting securities transactions for the ac3 count of others; or

4 ‘‘(ii) is compensated for such business

5 by the payment of commissions or similar

6 remuneration based on effecting trans7 actions in securities (other than fees cal8 culated as a percentage of assets under

9 management) in excess of the bank’s incre10 mental costs directly attributable to

11 effecting such transactions (hereafter re12 ferred to as ‘incentive compensation’).

13 ‘‘(C) EXEMPTION FOR CERTAIN BANK AC14 TIVITIES.—A bank shall not be considered to be

15 a broker because the bank engages in any of

16 the following activities under the conditions de17 scribed:

18 ‘‘(i) THIRD PARTY BROKERAGE AR19 RANGEMENTS.—The bank enters into a

20 contractual or other arrangement with a

21 broker or dealer registered under this title

22 under which the broker or dealer offers

23 brokerage services on or off the premises

24 of the bank if—
113

HR 4182 IH

1 ‘‘(I) such broker or dealer is

2 clearly identified as the person per3 forming the brokerage services;

4 ‘‘(II) the broker or dealer per5 forms brokerage services in an area

6 that is clearly marked, and unless

7 made impossible by space or personnel

8 considerations, physically separate

9 from the routine deposit-taking activi10 ties of the bank;

11 ‘‘(III) any materials used by the

12 bank to advertise or promote generally

13 the availability of brokerage services

14 under the contractual or other ar15 rangement clearly indicate that the

16 brokerage services are being provided

17 by the broker or dealer and not by the

18 bank;

19 ‘‘(IV) any materials used by the

20 bank to advertise or promote generally

21 the availability of brokerage services

22 under the contractual or other ar23 rangement are in compliance with the

24 Federal securities laws before dis25 tribution;
114

HR 4182 IH

1 ‘‘(V) bank employees perform

2 only clerical or ministerial functions in

3 connection with brokerage actions, in4 cluding scheduling appointments with

5 the associated persons of a broker or

6 dealer, and on behalf of a broker or

7 dealer, transmitting orders or han8 dling customers’ funds or securities,

9 except that bank employees who are

10 not so qualified may describe in gen11 eral terms investment vehicles under

12 the contractual or other arrangement

13 and accept customers’ orders on be14 half of the broker or dealer if such

15 employees have received training that

16 is substantially equivalent to the

17 training required for personnel quali18 fied to sell securities pursuant to the

19 requirements of a self-regulatory orga20 nization (as defined in section 3(a) of

21 the Securities Exchange Act of 1934);

22 ‘‘(VI) bank employees do not di23 rectly receive incentive compensation

24 for any brokerage transaction unless

25 such employees are associated persons
115

HR 4182 IH

1 of a broker or dealer and are qualified

2 pursuant to the requirements of a

3 self-regulatory organization (as so de4 fined) except that the bank employees

5 may receive nominal cash and

6 noncash compensation for customer

7 referrals if the cash compensation is a

8 one-time fee of a fixed dollar amount

9 and the payment of the fee is not con10 tingent on whether the referral results

11 in a transaction;

12 ‘‘(VII) such services are provided

13 by the broker or dealer on a basis in

14 which all customers which receive any

15 services are fully disclosed to the

16 broker or dealer; and

17 ‘‘(VIII) the broker or dealer in18 forms each customer that the broker19 age services are provided by the

20 broker or dealer and not by the bank

21 and that the securities are not depos22 its or other obligations of the bank,

23 are not guaranteed by the bank, and

24 are not insured by the Federal De25 posit Insurance Corporation.
116

HR 4182 IH

1 ‘‘(ii) TRUST ACTIVITIES.—The bank

2 engages in trust activities (including

3 effecting transactions in the course of such

4 trust activities) permissible for national

5 banks under the first section of the Act of

6 September 28, 1962, or for State banks

7 under relevant State trust statutes or law

8 (including securities safekeeping, self-di9 rected individual retirement accounts, or

10 managed agency accounts or other func11 tionally equivalent accounts of a bank) un12 less the bank—

13 ‘‘(I) publicly solicits brokerage

14 business, other than by advertising

15 that it effects transactions in securi16 ties in conjunction with advertising its

17 other activities; or

18 ‘‘(II) receives incentive com19 pensation for such brokerage activi20 ties.

21 ‘‘(iii) PERMISSIBLE SECURITIES

22 TRANSACTIONS.—The bank effects trans23 actions in exempted securities, other than

24 municipal securities, in commercial paper,

25 bankers acceptances, commercial bills,
117

HR 4182 IH

1 qualified Canadian Government obligations

2 as defined in section 5136 of the Revised

3 Statues, obligations of the Washington

4 Metropolitan Area Transit Authority which

5 are guaranteed by the Secretary of Trans6 portation under section 9 of the National

7 Capital Transportation Act of 1969, obli8 gations of the North American Develop9 ment Bank, and obligations of any local

10 public agency (as defined in section 110(h)

11 of the Housing Act of 1949) or any public

12 housing agency (as defined in the United

13 States Housing Act of 1937) that are ex14 pressly authorized by section 5136 of the

15 Revised Statutes of the United States as

16 permissible for a national bank to under17 write or deal in.

18 ‘‘(iv) MUNICIPAL SECURITIES.—The

19 bank effects transactions in municipal se20 curities.

21 ‘‘(v) EMPLOYEE AND SHAREHOLDER

22 BENEFIT PLANS.—The bank effects trans23 actions as part of any bonus, profit-shar24 ing, pension, retirement, thrift, savings, in25 centive, stock purchase, stock ownership,
118

HR 4182 IH

1 stock appreciation, stock option, dividend

2 reinvestment, or similar plan for employees

3 or shareholders of an issuer or its subsidi4 aries.

5 ‘‘(vi) SWEEP ACCOUNTS.—The bank

6 effects transactions as part of a program

7 for the investment or reinvestment of bank

8 deposit funds into any no-load, open-end

9 management investment company reg10 istered under the Investment Company Act

11 of 1940 that holds itself out as a money

12 market fund.

13 ‘‘(vii) AFFILIATE TRANSACTIONS.—

14 The bank effects transactions for the ac15 count of any affiliate of the bank, as de16 fined in section 102(c) of the Financial

17 Services Holding Company Act.

18 ‘‘(viii) PRIVATE SECURITIES OFFER19 INGS.—The bank—

20 ‘‘(I) effects sales as part of pri21 mary offering of securities by an is22 suer, not involving a public offering,

23 pursuant to section 3(b), 4(2), or 4(6)

24 of the Securities Act of 1933 and the
119

HR 4182 IH

1 rules and regulations issued there2 under; and

3 ‘‘(II) effects such sales exclu4 sively to an accredited investor, as de5 fined in section 3 of the Securities Act

6 of 1933.

7 ‘‘(ix) DE MINIMUS EXEMPTION.—If

8 the bank does not have a subsidiary or af9 filiate registered as a broker or dealer

10 under section 15, the bank effects, other

11 than in transactions referred to in causes

12 (i) through (viii), not more than—

13 ‘‘(I) 800 transactions in any cal14 endar year in securities for which a

15 ready market exists, and

16 ‘‘(II) 200 other transactions in

17 securities in any calendar year.

18 ‘‘(x) SAFEKEEPING AND CUSTODY

19 SERVICES.—The bank, as part of cus20 tomary banking activities—

21 ‘‘(I) provides safekeeping or cus22 tody services with respect to securi23 ties, including the exercise of warrants

24 or other rights on behalf of customers;
120

HR 4182 IH

1 ‘‘(II) clears or settles trans2 actions in securities;

3 ‘‘(III) effects securities lending

4 or borrowing transactions with or on

5 behalf of customers as part of services

6 provided to customers pursuant to

7 subclauses (I) and (II) or invests cash

8 collateral pledged in connection with

9 such transactions; or

10 ‘‘(IV) holds securities pledged by

11 one customer to another customer or

12 securities subject to resale agreements

13 between customers or facilitates the

14 pledging or transfer of such securities

15 by book entry.

16 ‘‘(xi) BANKING PRODUCTS.—The bank

17 effects transactions in products that—

18 ‘‘(I) are described in section

19 121(c)(2) of the Financial Services

20 Holding Company Act; or

21 ‘‘(II) have been exempted by the

22 appropriate Federal banking agency

23 pursuant to section 121(c)(3) of such

24 Act.
121

HR 4182 IH

1 ‘‘(D) EXEMPTION FOR ENTITIES SUBJECT

2 TO SECTION 15(e).—The term ‘broker’ does not

3 include a bank that—

4 ‘‘(i) was, immediately prior to the en5 actment of the Depository Institution Af6 filiation Act of 1995, subject to section

7 15(e); and

8 ‘‘(ii) is subject to such restrictions

9 and requirements as the Commission con10 siders appropriate.’’.

11 SEC. 302. DEFINITION OF DEALER.

12 Section 3(a)(5) of the Securities Exchange Act of

13 1934 (15 U.S.C. 78c(a)(5)) is amended to read as follows:

14 ‘‘(5) DEALER.—

15 ‘‘(A) IN GENERAL.—The term ‘dealer’

16 means any person engaged in the business of

17 buying and selling securities for such person’s

18 own account through a broker or otherwise.

19 ‘‘(B) EXCEPTION FOR PERSON NOT EN20 GAGED IN THE BUSINESS OF DEALING.—The

21 term ‘dealer’ does not include a person that

22 buys or sells securities for such person’s own

23 account, either individually or in a fiduciary ca24 pacity, but not as a part of a regular business.
122

HR 4182 IH

1 ‘‘(C) EXCLUSION OF BANKS.—The term

2 ‘dealer’ does not include a bank unless such

3 bank is affiliated with a financial services hold4 ing company, as defined in section 102(a) of

5 the Financial Services Holding Company Act.

6 ‘‘(D) EXEMPTION FOR CERTAIN BANK AC7 TIVITIES.—A bank shall not be considered to be

8 a dealer because the bank engages in any of the

9 following activities under the conditions de10 scribed:

11 ‘‘(i) The bank buys and sells commer12 cial paper, bankers acceptances, exempted

13 securities (other than municipal securities),

14 qualified Canadian Government obligations

15 as defined in section 5136 of the Revised

16 Statutes, obligations of the Washington

17 Metropolitan Area Transit Authority which

18 are guaranteed by the Secretary of Trans19 portation under section 9 of the National

20 Capital Transportation Act of 1969, obli21 gations of the North American Develop22 ment Bank, and obligations of any local

23 public agency (as defined in section 110(h)

24 of the Housing Act of 1949) or any public

25 agency (as defined in the United States
123

HR 4182 IH

1 Housing Act of 1937) that are expressly

2 authorized by section 5136 of the Revised

3 Statutes of the United States as permis4 sible for a national bank to underwrite or

5 deal in.

6 ‘‘(ii) The bank buys and sells munici7 pal securities that are expressly authorized

8 by section 5136 of the Revised Statutes of

9 the United States as permissible for a na10 tional bank to underwrite or deal in.

11 ‘‘(iii) The bank buys and sells securi12 ties for investment purposes for the bank

13 or for accounts for which the bank acts as

14 a trustee or fiduciary.

15 ‘‘(iv) The bank—

16 ‘‘(I) has not been affiliated with

17 a securities affiliate for purposes of

18 the Financial Services Holding Com19 pany Act for more than 1 year; and

20 ‘‘(II) engages in the issuance or

21 sale, through a grantor trust or other22 wise, of securities backed by or rep23 resenting an interest in notes, drafts,

24 acceptances, loans, leases, receivables,

25 other obligations, or pools of any such
124

HR 4182 IH

1 obligations originated or purchased by

2 the bank or any affiliate of the bank.

3 ‘‘(v) The bank buys and sells products

4 that—

5 ‘‘(I) are described in section

6 121(c)(2) of the Financial Services

7 Holding Company Act; or

8 ‘‘(II) have been exempted by the

9 appropriate Federal banking agency

10 pursuant to section 121(c)(3) of such

11 Act.’’.

12 SEC. 303. POWER TO EXEMPT FROM THE DEFINITIONS OF

13 BROKER AND DEALER.

14 Section 3 of the Securities Exchange Act of 1934 (15

15 U.S.C. 78c) is amended by adding at the end the follow16 ing:

17 ‘‘(e) EXEMPTION FROM THE DEFINITION OF

18 BROKER AND DEALER.—The Commission, by regulation

19 or order, upon its own motion or upon application, may

20 conditionally or unconditionally exclude any person or

21 class of persons from the definitions of ‘broker’ or ‘dealer’,

22 if the Commission finds that such exclusion is consistent

23 with the public interest, the protection of investors, and

24 the purposes of this title.’’.
125

HR 4182 IH

1 SEC. 304. MARGIN REQUIREMENTS.

2 (a) Section 7(d) of the Securities Exchange Act of

3 1934 (15 U.S.C. 15g(d)) is amended by striking ‘‘or (E)’’

4 and inserting ‘‘(E) to a loan to a broker or dealer by a

5 member bank or any other person that has entered into

6 an agreement pursuant to section 8(a) if the proceeds of

7 the loan are to be used in the ordinary course of the bro8 ker’s or dealer’s business other than for the purpose of

9 funding the purchase of securities for the account of such

10 broker or dealer, or (F)’’.

11 (b) Section 8(a) of the Securities and Exchange Act

12 of 1934 is amended—

13 (1) by striking ‘‘nonmember bank’’ and insert14 ing ‘‘person other than a member bank’’; and

15 (2) by striking ‘‘such bank’’ in the second sen16 tence and inserting ‘‘such person’’.

17 Subtitle B—Investment Company Provisions

18 SEC. 311. CUSTODY OF INVESTMENT COMPANY ASSETS BY

19 AFFILIATED BANK.

20 (a) MANAGEMENT COMPANIES.—Section 17(f) of the

21 Investment Company Act of 1940 (15 U.S.C. 80a–17(f))

22 is amended—

23 (1) by redesignating paragraphs (1), (2), and

24 (3) as subparagraphs (A), (B), and (A), (B), and

25 (C), respectively;
126

HR 4182 IH

1 (2) by striking ‘‘(f) Every, registered’’ and in2 serting ‘‘(f) CUSTODY OF SECURITIES.—

3 (1) Every registered’’;

4 (C) by designating the second, third,

5 fourth, and fifth sentences of such subsection

6 as paragraphs (2) through (5), respectively, and

7 indenting the left margin of such paragraphs

8 appropriately; and

9 (D) by adding at the end the following new

10 paragraph:

11 ‘‘(6) Notwithstanding any provision of this sub12 section, if a bank described in paragraph (1) and af13 filiated with a financial services company, as defined

14 in section 102(a) of the Financial Services Holding

15 Company Act, or an affiliated person of such bank,

16 is an affiliated person, promoter, organizer, or spon17 sor of, or principal underwriter for the registered

18 company, such bank may serve as custodian under

19 this subsection in accordance with such rules, regu20 lations, or orders as the Commission may prescribe,

21 consistent with the protection of investors, after con22 sulting in writing with the appropriate Federal

23 banking agency, as defined in section 3 of the Fed24 eral Deposit Insurance Act.’’.
127

HR 4182 IH

1 (b) UNIT INVESTMENT TRUSTS.—Section 26(a)(1) of

2 the Investment Company Act of 1940 (15 U.S.C. 80a–

3 26(a)(1)) is amended by inserting before the semicolon at

4 the end the following: ‘‘, except that, if the trustee or cus5 todian described in this subsection is an affiliated person

6 of such underwriter or depositor and of a financial services

7 holding company, as defined in section 102(a) of the Fi8 nancial Services Holding Company Act, the Commission

9 may adopt rules and regulations or issue orders, consistent

10 with the protection of investors, prescribing the conditions

11 under which such trustee or custodian may serve, after

12 consulting in writing with the appropriate Federal bank13 ing agency (as defined in section 3 of the Federal Deposit

14 Insurance Act)’’.

15 (c) FIDUCIARY DUTY OF CUSTODIAN.—Section 36(a)

16 of the Investment Company Act of 1940 (15 U.S.C. 80a–

17 35(a)) is amended—

18 (1) in paragraph (1), by striking ‘‘or’’ at the

19 end;

20 (2) in paragraph (2), by striking the period at

21 the end and inserting ‘‘; or’’; and

22 (3) by inserting after paragraph (2) the follow23 ing:

24 ‘‘(3) if affiliated with a financial services hold25 ing company, as defined section 102(a) of the Fi-
128

HR 4182 IH

1 nancial Services Holding Company Act, as custo2 dian.’’.

3 SEC. 312. LENDING TO AN AFFILIATED INVESTMENT COM4 PANY.

5 Section 18 of the Investment Company Act of 1940

6 (15 U.S.C. 80a–18) is amended by adding at the end the

7 following:

8 ‘‘(l) Notwithstanding any provision of this section, it

9 shall be unlawful for any affiliated person of a registered

10 investment company that is affiliated with a financial serv11 ices holding company, as defined in section 102(a) of the

12 Financial Services Holding Company Act, or any affiliated

13 person of such a person, to loan money to such investment

14 company in contravention of such rules, regulations, or or15 ders as the Commission may prescribe in the public inter16 est and consistent with the protection of investors.’’.

17 SEC. 313. INDEPENDENT DIRECTORS.

18 (a) IN GENERAL.—Section 2(a)(19)(A) of the Invest19 ment Company Act of 1940 (15 U.S.C. 80a–2(a)(19)(A))

20 is amended—

21 (1) by striking clause (v) and inserting the fol22 lowing new clause:

23 ‘‘(v) any person affiliated with a fi24 nancial services holding company (other

25 than a registered investment company)
129

HR 4182 IH

1 that, at any time during the preceding 6

2 months, has executed any portfolio trans3 actions for, engaged in any principal trans4 actions with, or distributed shares for—

5 ‘‘(I) the investment company,

6 ‘‘(II) any other investment com7 pany having the same investment ad8 viser as such investment company or

9 holding itself out to investors as a re10 lated company for purposes of invest11 ment or investor services, or

12 ‘‘(III) any account over which the

13 investment company’s investment ad14 viser has brokerage placement discre15 tion,

16 or any affiliated person of such a person,’’;

17 (2) by redesignating clause (vi) as clause (vii)

18 and

19 (3) by inserting after clause (v) the following

20 new clause:

21 ‘‘(vi) any person affiliated with a fi22 nancial services holding company (other

23 than a registered investment company)

24 that, at any time during the preceding 6

25 months, has loaned money to—
130

HR 4182 IH

1 ‘‘(I) the investment company,

2 ‘‘(II) any other investment com3 pany having the same investment ad4 viser as such investment company or

5 holding itself out to investors as a re6 lated company for purposes of invest7 ment or investor services, or

8 ‘‘(III) any account for which the

9 investment company’s investment ad10 viser has borrowing authority,

11 or any affiliated person of such a person,

12 or’’.

13 (b) AFFILIATION OF DIRECTORS.—Section 10(c) of

14 the Investment Company Act of 1940 (15 U.S.C. 80a–

15 10(c)) is amended by striking, ‘‘bank, except’’ and insert16 ing ‘‘bank affiliated with a financial services holding com17 pany (and its subsidiaries) or any single financial services

18 holding company (and its affiliates and subsidiaries), as

19 those terms are defined in the Financial Services Holding

20 Company Act of 1995, except’’.

21 (c) EFFECTIVE DATE.—The provisions of subsection

22 (a) of this section shall become effective 1 year after the

23 effective date of this subtitle.
131

HR 4182 IH

1 SEC. 314. ADDITIONAL SEC DISCLOSURE AUTHORITY.

2 (a) MISREPRESENTATION.—Section 35(a) of the In3 vestment Company Act of 1940 (15 U.S.C. 80a–34(a)) is

4 amended to read as follows:

5 ‘‘(a) MISREPRESENTATION OF GUARANTEES.—

6 ‘‘(1) IN GENERAL.—It shall be unlawful for any

7 person, issuing or selling any security of which a

8 registered investment company is the issuer, to rep9 resent or imply in any manner whatsoever that such

10 security or company—

11 ‘‘(A) has been guaranteed, sponsored, rec12 ommended, or approved by the United States,

13 or any agency, instrumentality or officer of the

14 United States;

15 ‘‘(B) has been insured by the Federal De16 posit Insurance Corporation;

17 ‘‘(C) is guaranteed by or is otherwise an

18 obligation of any bank or insured depository in19 stitution.

20 ‘‘(2) DISCLOSURES.—Any person that is affili21 ated with an insured depository institution and is22 sues or sells the securities of a registered investment

23 company shall prominently disclose that the invest24 ment company or any security issued by the invest25 ment company—
132

HR 4182 IH

1 ‘‘(A) is not insured by the Federal Deposit

2 Insurance Corporation;

3 ‘‘(B) is not guaranteed by an affiliated in4 sured depository institution; and

5 ‘‘(C) is not otherwise an obligation of any

6 bank or insured depository institution,

7 in accordance with such rules, regulations, or orders

8 as the Commission may prescribe as reasonably nec9 essary or appropriate in the public interest for the

10 protection of investors, after consulting in writing

11 with the appropriate Federal banking agencies.

12 ‘‘(3) DEFINITIONS.—The terms ‘insured deposi13 tory institution’ and ‘appropriate Federal banking

14 agency’ have the meanings given to such terms in

15 section 3 of the Federal Deposit Insurance Act.’’.

16 (b) DECEPTIVE USE OF NAMES.—Section 35(d) of

17 the Investment Company Act of 1940 (15 U.S.C. 80a–

18 34(d)) is amended to read as follows:

19 ‘‘(d)(1) It shall be unlawful for any registered invest20 ment company to adopt as part of the name or title of

21 such company, or any securities of which it is the issuer,

22 any word or words that the Commission finds are materi23 ally deceptive or misleading. The Commission may adopt

24 such rules or regulations or issue such orders as are nec-
133

HR 4182 IH

1 essary or appropriate to prevent the use of deceptive or

2 misleading names or titles by investment companies.

3 ‘‘(2) It shall be deceptive and misleading for any reg4 istered investment company—

5 ‘‘(A) that is an affiliated person of a bank that

6 is affiliated with a financial service holding company,

7 as defined in section 102(a) of the Financial Serv8 ices Holding Company Act, or an affiliated person of

9 such person, or

10 ‘‘(B) for which a bank that is affiliated with a

11 financial service holding company, as defined in sec12 tion 102(a) of the Financial Services Holding Com13 pany Act, or an affiliated person of such a bank,

14 acts as investment adviser, sponsor, promoter, or

15 principal underwriter,

16 to adopt, as part of the name or title such company, or

17 of any security of which it is an issuer, any word that

18 is the same or similar to, or a variation of, the name or

19 title of such bank, in contravention of such rules, regula20 tions, or orders as the Commission may, prescribe as nec21 essary or appropriate in the public interest or for the pro22 tection of investors.’’.
134

HR 4182 IH

1 SEC. 315. DEFINITION OF BROKER UNDER THE INVEST2 MENT COMPANY ACT OF 1940.

3 Section 2(a)(6) of the Investment Company Act of

4 1940 (15 U.S.C. 89a–2(a)(6)) is amended to read as fol5 lows:

6 ‘‘(6) The term ‘broker’ has the same meaning

7 as in the Securities Exchange Act of 1934, except

8 that such term does not include any person solely by

9 reason of the fact that such person is an underwriter

10 for one or more investment companies.’’.

11 SEC. 316. DEFINITION OF DEALER UNDER THE INVEST12 MENT COMPANY ACT OF 1940.

13 Section 2(a)(11) of the Investment Company Act of

14 1940 (15 U.S.C. 80a–2(a)(11)) is amended to read as fol15 lows:

16 ‘‘(11) The term ‘dealer’ has the same meaning

17 as in the Securities Exchange Act of 1934, but does

18 not include an insurance company or investment

19 company.’’.

20 SEC. 317. REMOVAL OF THE EXCLUSION FROM THE DEFINI21 TION OF INVESTMENT ADVISER FOR BANKS

22 THAT ADVISE INVESTMENT COMPANIES.

23 (a) INVESTMENT ADVISER.—Section 202(a)(11) of

24 the Investment Advisers Act of 1940 (15 U.S.C. 80b–

25 2(a)(11)) is amended in subparagraph (A), by striking

26 ‘‘investment company’’ and inserting ‘‘investment com-
135

HR 4182 IH

1 pany, except that the term ‘investment adviser’ includes

2 any financial services holding company, as defined in sec3 tion 102(a) of the Financial Services Holding Company

4 Act, or any bank affiliated with such company, to the ex5 tent that such financial services holding company or bank

6 acts as an investment adviser to a registered investment

7 company, or if, in the case of such a bank, such services

8 are performed through a separately identifiable depart9 ment or division, the department or division, and not the

10 bank itself, shall be deemed to be the investment adviser’’.

11 (b) SEPARATELY IDENTIFIABLE DEPARTMENT OR

12 DIVISION.—Section 202(a) of the Investment Advisers Act

13 of 1940 (15 U.S.C. 80b–2(a)) is amended by adding at

14 the end the following:

15 ‘‘(25) The term ‘separately identifiable depart16 ment or division’ of a bank means a unit—

17 ‘‘(A) that is under the direct supervision of

18 an officer or officers designated by the board of

19 directors of the bank as responsible for the day20 to-day conduct of the bank’s investment adviser

21 activities for one or more investment companies,

22 including the supervision of all bank employees

23 engaged in the performance of such activities;

24 and
136

HR 4182 IH

1 ‘‘(B) for which all of the records relating

2 to its investment adviser activities are sepa3 rately maintained in or extractable from such

4 unit’s own facilities or the facilities of the bank,

5 and such records are so maintained or other6 wise accessible as to permit independent exam7 ination and enforcement of this Act or the In8 vestment Company Act of 1940 and rules and

9 regulations promulgated under this Act or the

10 Investment Company Act of 1940.’’.

11 SEC. 318. DEFINITION OF BROKER UNDER THE INVEST12 MENT ADVISERS ACT OF 1940.

13 Section 202(a)(3) of the Investment Advisers Act of

14 1940 (15 U.S.C. 80b–2(a)(3)) is amended to read as fol15 lows:

16 ‘‘(3) The term ‘broker’ has the same meaning

17 as in the Securities Exchange Act of 1934.’’.

18 SEC. 319. DEFINITION OF DEALER UNDER THE INVEST19 MENT ADVISERS ACT OF 1940.

20 Section 202(a)(7) of the Investment Advisers Act of

21 1940 (15 U.S.C. 80b–2(a)(7)) is amended to read as fol22 lows:

23 ‘‘(7) The term ‘dealer’ has the same meaning as

24 in the Securities Exchange Act of 1934, but does
137

HR 4182 IH

1 not include an insurance company or investment

2 company.’’.

3 SEC. 320. INTERAGENCY CONSULTATION.

4 The Investment Advisers Act of 1940 (15 U.S.C.

5 80b–1 et seq.) is amended by inserting after section 210

6 the following new section:

7 ‘‘SEC. 210A. CONSULTATION.

8 ‘‘(a) EXAMINATION RESULTS AND OTHER INFORMA9 TION.—

10 ‘‘(1) The appropriate Federal banking agency

11 shall provide the Commission upon request the re12 sults of any examination, reports, records, or other

13 information as each may have access to with respect

14 to the investment advisory activities of any financial

15 services holding company, as defined in section

16 102(a) of the Financial Services Holding Company

17 Act, bank that is affiliated with a financial services

18 holding company, or separately identifiable depart19 ment or division of a bank, that is registered under

20 section 203 of this title, or, in the case of a financial

21 services holding company or affiliated bank, that has

22 a subsidiary or a separately identifiable department

23 or division registered under that section, to the ex24 tent necessary for the Commission to carry out its

25 statutory responsibilities.
138

HR 4182 IH

1 ‘‘(2) The Commission shall provide to the ap2 propriate Federal banking agency upon request the

3 results of any examination, reports, records, or other

4 information with respect to the investment advisory

5 activities of any financial services holding company,

6 bank that is affiliated with a financial services hold7 ing company, or separately identifiable department

8 or division of a bank, any of which is registered

9 under section 203 of this title, to the extent nec10 essary for the agency to carry out its statutory re11 sponsibilities.

12 ‘‘(b) EFFECT ON OTHER AUTHORITY.—Nothing

13 herein shall limit in any respect the authority of the appro14 priate Federal banking agency with respect to such finan15 cial services holding company, bank that is affiliated with

16 a financial services holding company, or department or di17 vision under any provision of law.

18 ‘‘(c) DEFINITION.—For purposes of this section, the

19 term ‘appropriate Federal banking agency’ shall have the

20 same meaning as in section 3 of the Federal Deposit in21 surance Act.’’

22 SEC. 321. TREATMENT OF BANK COMMON TRUST FUNDS.

23 (a) SECURITIES ACT OF 1933.—Section 3(a)(2) of

24 the Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is

25 amended by striking ‘‘or any interest or participation in
139

HR 4182 IH

1 any common trust fund or similar fund maintained by a

2 bank exclusively for the collective investment and reinvest3 ment of assets contributed thereto by such bank in its ca4 pacity as trustee, executor, administrator, or guardian’’

5 and inserting ‘‘or any interest or participation in any com6 mon trust fund or similar fund that is excluded from the

7 definition of the term ‘investment company’ under section

8 3(c)(3) of the Investment Company Act of 1940’’.

9 (b) SECURITIES EXCHANGE ACT OF 1934.—Section

10 3(a)(12)(A)(iii) of the Securities Exchange Act of 1934

11 (15 U.S.C. 78c(a)(12)(A)(iii) is amended to read as fol12 lows:

13 ‘‘(iii) any interest or participation in

14 any common trust fund or similar fund

15 that is excluded from the definition of the

16 term ‘investment company’ under section

17 3(c)(3) of the Investment Company Act of

18 1940;’’.

19 (c) INVESTMENT COMPANY ACT OF 1940.—Section

20 3(c)(3) of the Investment Company Act of 1940 (15

21 U.S.C. 80a–3(c)(3)) is amended by inserting before the

22 period the following: ’’, if—

23 ‘‘(A) such fund is employed by the bank

24 solely as an aid to the administration of trusts,
140

HR 4182 IH

1 estates, or other accounts created and main2 tained for a fiduciary purpose;

3 ‘‘(B) except if the bank is not affiliated

4 with a financial services holding company, as

5 defined in section 102(a) of the Financial Serv6 ices Holding Company Act, or in connection

7 with the ordinary advertising of the bank’s fidu8 ciary services, interests in such fund are not—

9 ‘‘(i) advertised; or

10 ‘‘(ii) offered for sale to the general

11 public, and

12 ‘‘(C) fees and expenses charged by such

13 fund are not in contravention of fiduciary prin14 ciples established under applicable Federal or

15 State law.’’

16 SEC. 322. INVESTMENT ADVISERS PROHIBITED FROM HAV17 ING CONTROLLING INTEREST IN REG18 ISTERED INVESTMENT COMPANY.

19 Section 15 of the Investment Company Act of 1940

20 (15 U.S.C. 80a–15) is amended by adding at the end the

21 following new subsection:

22 ‘‘(g) CONTROLLING INTEREST IN INVESTMENT COM23 PANY PROHIBITED.—

24 ‘‘(1) IN GENERAL.—If any investment adviser

25 to a registered investment company, or an affiliated
141

HR 4182 IH

1 person of that investment adviser, holds a control2 ling interest in that registered investment company

3 in a trustee or fiduciary capacity, such person

4 shall—

5 ‘‘(A) if it holds the shares in a trustee or

6 fiduciary capacity with respect to any employee

7 benefit plan subject to the Employee Retire8 ment Income Security Act of 1974, transfer the

9 power to vote the shares of the investment com10 pany through to another person acting in a fi11 duciary capacity with respect to the plan who is

12 not an affiliated person of that investment ad13 viser or any affiliated person thereof; or

14 ‘‘(B) if it holds the shares in a trustee or

15 fiduciary capacity with respect to any other per16 son or entity other than an employee benefit

17 plan subject to the Employee Retirement In18 come Security Act of 1974—

19 ‘‘(i) transfer the power to vote the

20 shares of the investment company through

21 to—

22 ‘‘(I) the beneficial owners of the

23 shares;

24 ‘‘(II) another person acting in a

25 fiduciary capacity who is not an affili-
142

HR 4182 IH

1 ated person of that investment adviser

2 or any affiliated person thereof; or

3 ‘‘(III) any person authorized to

4 receive statements and information

5 with respect to the trust who is not an

6 affiliated person of that investment

7 adviser or any affiliated person there8 of;

9 ‘‘(ii) vote the shares of the investment

10 company held by it in the same proportion

11 as shares held by all other shareholders of

12 the company; or

13 ‘‘(iii) vote the shares of the invest14 ment company as otherwise permitted

15 under such rules, regulations, or orders as

16 the Commission may prescribe for the pro17 tection of investors.

18 ‘‘(2) EXEMPTION.—Paragraph (1) shall not

19 apply to any investment adviser to a registered in20 vestment company, or an affiliated person of that in21 vestment adviser, if such investment adviser or affili22 ated person—

23 ‘‘(A) is not affiliated with a financial serv24 ices holding company, as defined in section
143

HR 4182 IH

1 102(a) of the Financial Services Holding Com2 pany Act; or

3 ‘‘(B) holds shares of the investment com4 pany in a trustee or fiduciary capacity if that

5 registered investment company consists solely of

6 assets held in such capacities.

7 ‘‘(3) SAFE HARBOR.—No investment adviser to

8 a registered investment company or any affiliated

9 person of such investment adviser shall be deemed to

10 have acted unlawfully or to have breached a fidu11 ciary duty under State or Federal law solely by rea12 son of acting in accordance with clause (i), (ii), or

13 (iii) of paragraph (1)(B).

14 ‘‘(4) CHURCH PLAN EXEMPTION.—Paragraph

15 (1) shall not apply to any investment adviser to a

16 registered investment company, or an affiliated per17 son of that investment adviser, holding shares in

18 such a capacity, if such investment adviser or such

19 affiliated person is an organization described in sec20 tion 414(e)(3)(A) of the Internal Revenue Code of

21 1986.’’.

22 SEC. 323. CONFORMING CHANGE IN DEFINITION.

23 Section 2(a)(5) of the Investment Company Act of

24 1940 (15 U.S.C. 80a–2(a)(5)) is amended by striking

25 ‘‘(A) a banking institution under the laws of the United
144

HR 4182 IH

1 States’’ and inserting ‘‘(A) a depository institution (as de2 fined in section 3 of the Federal Deposit Insurance Act)

3 or a branch or agency of a foreign bank (as such terms

4 are defined in section 101(b) of the International Banking

5 Act of 1978)’’.

6 SEC. 324. EFFECTIVE DATE.

7 This subtitle shall take effect 270 days after the ef8 fective date of this Title.

9 TITLE IV—WHOLESALE FINANCIAL INSTI10 TUTIONS OWNED BY FINANCIAL SERV11 ICES HOLDING COMPANIES

12 SEC. 401. NATIONAL WHOLESALE FINANCIAL INSTITU13 TIONS.

14 Chapter 1 of Title LXII of the Revised Statutes of

15 the United States (12 U.S.C. 21 et seq.) is amended by

16 inserting after section 5136A the following new section:

17 ‘‘SEC. 5136B. NATIONAL WHOLESALE FINANCIAL INSTITU18 TIONS.

19 ‘‘(a) NATIONAL WHOLESALE FINANCIAL INSTITU20 TIONS.—Any financial services holding company (as de21 fined in Section 102(a) of the Financial Services Holding

22 Company Act) may apply to the Comptroller of the Cur23 rency on such forms and in accordance with such proce24 dures as the Comptroller may prescribe by regulation, for

25 permission to organize a national wholesale financial insti-
145

HR 4182 IH

1 tution. Upon approval of the application, such national

2 wholesale financial institution shall be a body corporate,

3 chartered under the laws of the United States by the

4 Comptroller. A national wholesale financial institution

5 shall operate pursuant to the requirements of this section

6 at the direction of a board of directors elected at an orga7 nizational meeting, to be held as soon as practicable after

8 issuance by the Comptroller of a charter, by such financial

9 services holding company for the purpose of electing such

10 board of directors and taking such other action necessary,

11 pursuant to the charter and the regulations issued by the

12 Comptroller, to complete the corporate organization of the

13 national wholesale financial institution. Immediately fol14 lowing its election, the board of directors shall meet to

15 elect the officers of the national wholesale financial insti16 tution and to take such other action, as prescribed by the

17 Comptroller, to complete the corporate organization of

18 such national wholesale financial institution.

19 ‘‘(b) UNAUTHORIZED ORGANIZATION PROHIBITED.—

20 ‘‘(1) IN GENERAL.—No person may organize a

21 national wholesale financial institution, collect

22 money from others for such purpose, or represent

23 himself or herself as authorized to do so and no na24 tional wholesale financial institution shall transact

25 any business prior to completion of its organization
146

HR 4182 IH

1 except as provided in this section and in implement2 ing regulations of the Comptroller.

3 ‘‘(2) INSRUANCE TERMINATION.—No bank that

4 is insured under the Federal Deposit Insurance Act

5 may become a national wholesale financial institu6 tion unless—

7 ‘‘(A) it has met all the requirements under

8 that Act for voluntary termination of deposit in9 surance; and

10 ‘‘(B) it is affiliated with a financial service

11 holding company, as defined in section 102(a)

12 of the Financial Services Holding Company

13 Act.

14 ‘‘(c) AUTHORIZED ACTIVITIES FOR NATIONAL

15 WHOLESALE FINANCIAL INSTITUTION.—Except as other16 wise provided in this section, a national wholesale financial

17 institution—

18 ‘‘(1) may exercise, in accordance with its arti19 cles of organization and such regulations as are is20 sued by the Comptroller, all of the powers and privi21 leges of a national banking association formed in ac22 cordance with section 5133 of the Revised Statutes

23 of the United States; and

24 ‘‘(2) shall be subject to any provision of title

25 LXII of the Revised Statutes of the United States
147

HR 4182 IH

1 that is applicable to a national banking association

2 that is not a national wholesale financial institution.

3 ‘‘(d) TERMINATION.—A national wholesale financial

4 institution may terminate its status as a national banking

5 association only with the prior written approval of the

6 Comptroller and on terms and conditions that the Comp7 troller determines are appropriate to carry out the pur8 poses of this section.

9 ‘‘(e) PROMPT CORRECTIVE ACTION.—A national

10 wholesale financial institution shall be deemed to be an

11 insured depository institution for purposes of section 38

12 of the Federal Deposit Insurance Act except that—

13 ‘‘(1) the relevant capital levels and capital

14 measures for each capital category shall be the levels

15 specified by the Comptroller for national wholesale

16 financial institutions in accordance with subsection

17 (i)(2);

18 ‘‘(2) the provisions applicable to well capitalized

19 insured depository institutions shall be inapplicable

20 to national wholesale financial institutions;

21 ‘‘(3) the provisions authorizing or requiring an

22 institution to be placed into receivership shall not

23 apply to a national wholesale financial institution,

24 and, instead, the Comptroller is authorized or re-
148

HR 4182 IH

1 quired to place the national wholesale financial insti2 tution into conservatorship; and

3 ‘‘(4) for purposes of applying the provisions of

4 section 38 of the Federal Deposit Insurance Act to

5 national wholesale financial institutions, all ref6 erences to the appropriate Federal banking agency

7 or to the Corporation in that section shall be deemed

8 to be references to the Comptroller.

9 ‘‘(f) ENFORCEMENT AUTHORITY.—Subsections (j)

10 and (k) of section 7, subsections (b) through (n), (s), (u),

11 and (v) of section 8, and section 19 of the Federal Deposit

12 Insurance Act shall apply to a national wholesale financial

13 institution in the same manner and to the same extent

14 as such provisions apply to insured national banks and

15 any references in such sections to an insured depository

16 institution shall be deemed, for purposes of this para17 graph, to be a reference to a national wholesale financial

18 institution.

19 ‘‘(g) CERTAIN OTHER STATUTES APPLICABLE.—A

20 national wholesale financial institution shall be deemed to

21 be a banking institution, and the Comptroller shall be the

22 appropriate Federal banking agency for such bank and all

23 such bank’s affiliates, for purposes of the International

24 Lending Supervision Act.
149

HR 4182 IH

1 ‘‘(h) BANK MERGER ACT.—A national wholesale fi2 nancial institution shall be subject to the provisions of sec3 tions 18(c) and 44 of the Federal Deposit Insurance Act

4 in the same manner and to the same extent the national

5 wholesale financial institution would be subject to such

6 sections if the institution were an insured national bank.

7 ‘‘(i) SPECIFIC REQUIREMENTS APPLICABLE TO NA8 TIONAL WHOLESALE FINANCIAL INSTITUTIONS.—

9 ‘‘(1) LIMITATIONS ON DEPOSITS.—

10 ‘‘(A) MINIMUM AMOUNT.—

11 ‘‘(i) IN GENERAL.—Pursuant to such

12 regulations as the Comptroller may pre13 scribe, no national wholesale financial in14 stitution may receive initial deposits of

15 $100,000 or less, other than on an inciden16 tal or occasional basis.

17 ‘‘(ii) LIMITATION ON DEPOSITS OF

18 LESS THAN $100,000.—No bank may be

19 treated as a national wholesale financial

20 institution if the total amount of the initial

21 deposits of $100,000 or less at such bank

22 constitutes more than 5 percent of the

23 bank’s total deposits.

24 ‘‘(B) NO DEPOSIT INSURANCE.—No depos25 its held by a national wholesale financial insti-
150

HR 4182 IH

1 tution shall be insured deposits under the Fed2 eral Deposit Insurance Act.

3 ‘‘(C) ADVERTISING AND DISCLOSURE.—

4 The Comptroller shall prescribe regulations per5 taining to advertising and disclosure by national

6 wholesale financial institutions to ensure that

7 each depositor is notified that deposits at such

8 wholesale financial institution are not federally

9 insured or otherwise guaranteed by the United

10 States Government.

11 ‘‘(2) SPECIFIC CAPITAL REQUIREMENTS APPLI12 CABLE TO NATIONAL WHOLESALE FINANCIAL INSTI13 TUTIONS.—

14 ‘‘(A) MINIMUM CAPITAL LEVELS.—

15 ‘‘(i) IN GENERAL.—The Comptroller

16 shall, by regulation, adopt capital require17 ments for national wholesale financial in18 stitutions to—

19 ‘‘(A) account for the status of national

20 wholesale financial institutions as institutions

21 that accept deposits that are not insured under

22 the Federal Deposit Insurance Act; and

23 ‘‘(B) provide for the safe and sound oper24 ation of the national wholesale financial institu25 tion without undue risk to creditors or other
151

HR 4182 IH

1 persons engaged in transactions with such insti2 tution.

3 ‘‘(2) MINIMUM TIER 1 CAPITAL RATIO.—The

4 minimum ratio of tier 1 capital to total risk-weight5 ed assets of national wholesale financial institutions

6 shall be not less than the level required for an in7 sured national bank to be well capitalized unless the

8 Comptroller determines otherwise, consistent with

9 safety and soundness.

10 ‘‘(3) CAPITAL CATEGORIES FOR PROMPT COR11 RECTIVE ACTION.—For purposes of applying section

12 38 of the Federal Deposit Insurance Act with re13 spect to any national wholesale financial institution,

14 the Comptroller shall, by regulation, establish, for

15 each relevant capital measure specified by the Comp16 troller under this subsection, the levels at which a

17 national wholesale financial institution is well cap18 italized, adequately capitalized, undercapitalized, sig19 nificantly undercapitalized, and critically under20 capitalized.

21 ‘‘(4) ADDITIONAL REQUIREMENTS APPLICABLE

22 TO NATIONAL WHOLESALE FINANCIAL INSTITU23 TIONS.—In addition to any requirement otherwise

24 applicable to State member banks or applicable,

25 under this section, to national wholesale financial in-
152

HR 4182 IH

1 stitutions, the Comptroller may prescribe, by regula2 tion or order, for national wholesale financial institu3 tions—

4 ‘‘(A) limitations on transaction with affili5 ates to prevent an affiliate from gaining access

6 to, or the benefits of, credit from a Federal re7 serve bank, including overdrafts at a Federal

8 reserve bank;

9 ‘‘(B) special clearing balance requirements;

10 and

11 ‘‘(C) any additional requirements that the

12 Comptroller determines to be appropriate or

13 necessary to—

14 ‘‘(i) promote the safety and soundness

15 of the national wholesale financial institu16 tion, or

17 ‘‘(ii) protect creditors and other per18 sons engaged in transactions with the na19 tional wholesale financial institution.

20 ‘‘(5) EXEMPTIONS FOR NATIONAL WHOLESALE

21 FINANCIAL INSTITUTIONS.—The Comptroller may,

22 by regulation or order, exempt any national whole23 sale financial institution from any provision applica24 ble to a national bank that is not a national whole-
153

HR 4182 IH

1 sale financial institution, if the Comptroller finds

2 that such exemption is not inconsistent with—

3 ‘‘(A) the promotion of the safety and

4 soundness of the national wholesale financial in5 stitution; and

6 ‘‘(B) the protection of creditors and other

7 persons engaged in transactions with the na8 tional wholesale financial institution.

9 ‘‘(6) NO EFFECT ON OTHER PROVISIONS.—This

10 section shall not be construed as limiting the Comp11 troller’s authority over national banks under any

12 other provision of law, or to create any obligation for

13 any Federal reserve bank to make, increase, review,

14 or extend any advances or discount under the Fed15 eral Reserve Act to any member bank or other de16 pository institution.

17 ‘‘(d) CONSERVATORSHIP AUTHORITY.—The Comp18 troller may appoint a conservator to take possession and

19 control of a national wholesale financial institution to the

20 same extent and in the same manner as the Comptroller

21 may appoint a conservator for a national bank under sec22 tion 203 of the Bank Conservation Act, and the conserva23 tor shall exercise the same powers, functions, and duties,

24 subject to the same limitations, as are provided under such

25 Act for conservators of national banks.
154

HR 4182 IH

1 ‘‘(e) DEFINITIONS.—For purposes of this section, the

2 following definitions shall apply:

3 ‘‘(1) NATIONAL WHOLESALE FINANCIAL INSTI4 TUTION.—The term ‘national wholesale financial in5 stitution’ means a bank that has been approved to

6 become a national wholesale financial institution by

7 the Comptroller under this section pursuant to an

8 application filed under subsection (a).

9 ‘‘(2) DEPOSIT.—The term ‘deposit’ has the

10 meaning given to such term by the Comptroller

11 under this Section.

12 ‘‘(f) EXCLUSIVE JURISDICTION.—Subsections (c) and

13 (e) of section 43 of the Federal Deposit Insurance Act

14 shall not apply to any national wholesale financial institu15 tion.’’.

16 SEC. 402. STATE MEMBER WHOLESALE FINANCIAL INSTITU17 TIONS.

18 (a) IN GENERAL.—The Federal Reserve Act (12

19 U.S.C. 221 et seq.) is amended by inserting after section

20 9A the following new section:

21 ‘‘SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.

22 ‘‘(a) APPLICATION FOR MEMBERSHIP AS WHOLE23 SALE FINANCIAL INSTITUTION.—

24 ‘‘(1) APPLICATION REQUIRED.—
155

HR 4182 IH

1 ‘‘(A) IN GENERAL.—Any bank incor2 porated by special law of any State, or orga3 nized under the general laws of any State, may

4 apply to the Board of Governors of the Federal

5 Reserve System to become a State member

6 wholesale financial institution and to subscribe

7 to the stock of the Federal reserve bank orga8 nized within the district where the applying

9 bank is located.

10 ‘‘(B) TREATMENT AS STATE MEMBER

11 BANK.—Any application under subparagraph

12 (A) shall be treated as an application to become

13 a State member bank under, and shall be sub14 ject to the provisions of, section 9.

15 ‘‘(2) INSURANCE TERMINATION.—No bank that

16 is insured under the Federal Deposit Insurance Act

17 may become a State member wholesale financial in18 stitution unless—

19 ‘‘(A) it has met all requirements under

20 that Act for voluntary termination of deposit in21 surance; and

22 ‘‘(B) is affiliated with a financial services

23 holding company, as defined in section 102(a)

24 of the Financial Services Holding Company

25 Act.
156

HR 4182 IH

1 ‘‘(b) GENERAL REQUIREMENTS APPLICABLE TO

2 STATE MEMBER WHOLESALE FINANCIAL INSTITU3 TIONS.—

4 ‘‘(1) FEDERAL RESERVE ACT.—Except as oth5 erwise provided in this section, State member whole6 sale financial institutions shall be member banks

7 and shall be subject to the provisions of this Act

8 that apply to member banks to the same extent and

9 in the same manner as State member insured banks,

10 except that a State member wholesale financial insti11 tution may terminate membership under this Act

12 only with the prior written approval of the Board

13 and on terms and conditions that the Board deter14 mines are appropriate to carry out the purposes of

15 this Act.

16 ‘‘(2) PROMPT CORRECTIVE ACTION.—A State

17 member wholesale financial institution shall be

18 deemed to be an insured depository institution for

19 purposes of section 38 of the Federal Deposit Insur20 ance Act except that—

21 ‘‘(A) the relevant capital levels and capital

22 measures for each capital category shall be the

23 levels specified by the Board for State member

24 wholesale financial institutions in accordance

25 with subsection (c);
157

HR 4182 IH

1 ‘‘(B) the provisions applicable to well cap2 italized insured depository institutions shall be

3 inapplicable to wholesale financial institutions;

4 ‘‘(C) the provisions authorizing or requir5 ing an institution to be placed into receivership

6 shall not apply to a State member wholesale fi7 nancial institution, and, instead, the Board is

8 authorized or required, as the case may be, to

9 terminate the State member wholesale financial

10 institution’s membership in the Federal Reserve

11 System or place the bank into conservatorship;

12 and

13 ‘‘(D) for purposes of applying the provi14 sions of section 38 of the Federal Deposit In15 surance Act to State member wholesale finan16 cial institutions, all references to the appro17 priate Federal banking agency or to the Cor18 poration in that section shall be deemed to be

19 references to the Board.

20 ‘‘(3) ENFORCEMENT AUTHORITY.—Subsections

21 (j) and (k) of section 7, subsections (b) through (n),

22 (s), (u), and (v) of section 8, and section 19 of the

23 Federal Deposit Insurance Act shall apply to a State

24 member wholesale financial institution in the same

25 manner and to the same extent as such provisions
158

HR 4182 IH

1 apply to State member insured banks and any ref2 erences in such sections to an insured depository in3 stitution shall be deemed, for purposes of this para4 graph, to be a reference to a State member whole5 sale financial institution.

6 ‘‘(4) CERTAIN OTHER STATUTES APPLICA7 BLE.—A State member wholesale financial institu8 tion shall be deemed to be a banking institution, and

9 the Board shall be the appropriate Federal banking

10 agency for such bank and all such bank’s affiliates

11 for purposes of the International Lending Super12 vision Act.

13 ‘‘(5) BANK MERGER ACT.—A State member

14 wholesale financial institution shall be subject to the

15 provisions of sections 18(c) and 44 of the Federal

16 Deposit Insurance Act in the same manner and to

17 the same extent as the State member wholesale fi18 nancial institution would be subject to such sections

19 if the institution were a State member insured bank.

20 ‘‘(c) SPECIFIC REQUIREMENTS APPLICABLE TO

21 STATE MEMBER WHOLESALE FINANCIAL INSTITU22 TIONS.—

23 ‘‘(1) LIMITATIONS ON DEPOSITS.—

24 ‘‘(A) MINIMUM AMOUNT.—
159

HR 4182 IH

1 ‘‘(i) IN GENERAL.—Pursuant to such

2 regulations as the Board may prescribe, no

3 State member wholesale financial institu4 tion may receive initial deposits of

5 $100,000 or less, other than on an inciden6 tal or occasional basis.

7 ‘‘(ii) LIMITATION ON DEPOSITS OF

8 LESS THAN $100,000.—No bank may be

9 treated as a State member wholesale finan10 cial institution if the total amount of the

11 initial deposits of $100,000 or less at such

12 bank constitutes more than 5 percent of

13 the bank’s total deposits.

14 ‘‘(B) NO DEPOSIT INSURANCE.—No depos15 its held by a State member wholesale financial

16 institution shall be insured deposits under the

17 Federal Deposit Insurance Act.

18 ‘‘(C) ADVERTISING AND DISCLOSURE.—

19 The Board shall prescribe regulations pertain20 ing to advertising and disclosure by State mem21 ber wholesale financial institutions to ensure

22 that each depositor is notified that deposits at

23 such wholesale financial institution are not fed24 erally insured or otherwise guaranteed by the

25 United States Government.
160

HR 4182 IH

1 ‘‘(2) SPECIAL CAPITAL REQUIREMENTS APPLI2 CABLE TO STATE MEMBER WHOLESALE FINANCIAL

3 INSTITUTIONS.—

4 ‘‘(A) MINIMUM CAPITAL LEVELS.—

5 ‘‘(i) IN GENERAL.—The Board shall,

6 by regulation, adopt capital requirements

7 for State member wholesale financial insti8 tutions—

9 ‘‘(I) to account for the status of

10 State member wholesale financial in11 stitutions as institutions that accept

12 deposits that are not insured under

13 the Federal Deposit Insurance Act;

14 and

15 ‘‘(II) to provide for the safe and

16 sound operation of the State member

17 wholesale financial institution without

18 undue risk to creditors or other per19 sons, including Federal reserve banks,

20 engaged in transactions with such in21 stitution.

22 ‘‘(ii) MINIMUM TIER 1 CAPITAL

23 RATIO.—The minimum ratio of tier 1 cap24 ital to total risk-weighted assets of State

25 member wholesale financial institutions
161

HR 4182 IH

1 shall be not less than the level required for

2 a State member insured bank to be well

3 capitalized unless the Board determines

4 otherwise, consistent with safety and

5 soundness.

6 ‘‘(B) CAPITAL CATEGORIES FOR PROMPT

7 CORRECTIVE ACTION.—For purposes of apply8 ing section 38 of the Federal Deposit Insurance

9 Act with respect to any wholesale financial in10 stitution, the Board shall, by regulation, estab11 lish, for each relevant capital measure specified

12 by the Board under subparagraph (A), the lev13 els at which a State member wholesale financial

14 institution is well capitalized, adequately cap15 italized, undercapitalized, significantly under16 capitalized, and critically undercapitalized.

17 ‘‘(3) ADDITIONAL REQUIREMENTS APPLICABLE

18 TO STATE MEMBER WHOLESALE FINANCIAL INSTI19 TUTIONS.—In addition to any requirement otherwise

20 applicable to State member banks or applicable,

21 under this section, to State member wholesale finan22 cial institutions, the Board may prescribe, by regula23 tion or order, for State member wholesale financial

24 institutions—
162

HR 4182 IH

1 ‘‘(A) limitations on transaction with affili2 ates to prevent an affiliate from gaining access

3 to, or the benefits of, credit from a Federal re4 serve bank, including overdrafts at a Federal

5 reserve bank;

6 ‘‘(B) special clearing balance requirements;

7 and

8 ‘‘(C) any additional requirements that the

9 Board determines to be appropriate or nec10 essary to—

11 ‘‘(i) promote the safety and soundness

12 of the wholesale financial institution, or

13 ‘‘(ii) protect creditors and other per14 sons, including Federal reserve banks, en15 gaged in transactions with the State mem16 ber wholesale financial institution.

17 ‘‘(4) EXEMPTIONS FOR STATE MEMBER WHOLE18 SALE FINANCIAL INSTITUTIONS.—The Board may,

19 by regulation or order, exempt any State member

20 wholesale financial institution from any provision ap21 plicable to a State member bank that is not a State

22 member wholesale financial institution, if the Board

23 finds that such exemption is not inconsistent with—
163

HR 4182 IH

1 ‘‘(A) the promotion of the safety and

2 soundness of the State member wholesale finan3 cial institution; and

4 ‘‘(B) the protection of creditors and other

5 persons, including Federal reserve banks, en6 gaged in transactions with the State member

7 wholesale financial institution.

8 ‘‘(5) NO EFFECT ON OTHER PROVISIONS.—This

9 section shall not be construed as limiting the

10 Board’s authority over member banks under any

11 other provision of law, or to create any obligation for

12 any Federal reserve bank to make, increase, renew,

13 or extend any advances or discount under this Act

14 to any member bank or other depository institution.

15 ‘‘(d) CONSERVATORSHIP AUTHORITY.—

16 ‘‘(1) IN GENERAL.—The Board may appoint a

17 conservator to take possession and control of a State

18 member wholesale financial institution to the same

19 extent and in the same manner as the Comptroller

20 of the Currency may appoint a conservator for a na21 tional bank under section 203 of the Bank Con22 servation Act, and the conservator shall exercise the

23 same powers, functions, and duties, subject to the

24 same limitations, as are provided under such Act for

25 conservators of national banks.
164

HR 4182 IH

1 ‘‘(2) BOARD AUTHORITY.—The Board shall

2 have the same authority with respect to any con3 servator appointed under paragraph (1) and the

4 State member wholesale financial institution for

5 which such conservator has been appointed as the

6 Comptroller of the Currency has under the Bank

7 Conservation Act with respect to a conservator ap8 pointed under such Act and a national bank for

9 which the conservator has been appointed.

10 ‘‘(e) DEFINITIONS.—For purposes of this section, the

11 following definitions shall apply:

12 ‘‘(1) STATE MEMBER WHOLESALE FINANCIAL

13 INSTITUTION.—The term ‘State member wholesale

14 financial institution’ means a bank whose application

15 to become a State member wholesale financial insti16 tution and a State member bank has been approved

17 by the Board under this section.

18 ‘‘(2) DEPOSIT.—The term ‘deposit’ has the

19 meaning given to such term by the Board under this

20 Act.

21 ‘‘(3) STATE MEMBER INSURED BANK.—The

22 term ‘State member insured bank’ means a State

23 member bank which is an insured bank (as defined

24 in section 3(h) of the Federal Deposit Insurance

25 Act).
165

HR 4182 IH

1 ‘‘(f) EXCLUSIVE JURISDICTION.—Subsections (c) and

2 (e) of section 43 of the Federal Deposit Insurance Act

3 shall not apply to any State member wholesale financial

4 institution.’’.

5 SEC. 403. AMENDMENTS TO THE FEDERAL DEPOSIT INSUR6 ANCE ACT.

7 (a) VOLUNTARY TERMINATION OF INSURED STATUS

8 BY CERTAIN INSTITUTIONS.—

9 (1) SECTION 8 DESIGNATIONS.—Section 8(a) of

10 the Federal Deposit Insurance Act (12 U.S.C.

11 1818(a)) is amended—

12 (A) by striking paragraph (1); and

13 (B) by redesignating paragraphs (2)

14 through (9) as paragraphs (1) through (8), re15 spectively.

16 (2) VOLUNTARY TERMINATION OF INSURED

17 STATUS.—The Federal Deposit Insurance Act (12

18 U.S.C. 1811 et seq.) is amended by inserting after

19 section 8 the following new section:

20 ‘‘SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS IN21 SURED DEPOSITORY INSTITUTION.

22 ‘‘(a) IN GENERAL.—Except as provided in subsection

23 (b), an insured State bank or a national bank may volun24 tarily terminate such bank’s status as an insured deposi-
166

HR 4182 IH

1 tory institution in accordance with regulations of the Cor2 poration if—

3 ‘‘(1) the bank provides written notice of the

4 bank’s intent to terminate such insured status—

5 ‘‘(A) to the Corporation and either the

6 Board of Governors of the Federal Reserve Sys7 tem (in the case of a State member bank) or

8 the Comptroller of the Currency (in the case of

9 a national bank) not less than 6 months before

10 the effective date of such termination; and

11 ‘‘(B) to all depositors at such bank, not

12 less than 6 months before the effective date of

13 the termination of such status; and

14 ‘‘(2) either—

15 ‘‘(A) the deposit insurance fund of which

16 such bank is a member equals or exceeds the

17 fund’s designated reserve ratio as of the date

18 the bank provides a written notice under para19 graph (1) and the Corporation determines that

20 the fund will equal or exceed the applicable des21 ignated reserve ratio for the 2 semiannual as22 sessment periods immediately following such

23 date; or

24 ‘‘(B) the Corporation and the Board of

25 Governors of the Federal Reserve System (in
167

HR 4182 IH

1 the case of a State member bank) or the Comp2 troller of the Currency (in the case of a na3 tional bank) approve the termination of the

4 bank’s insured status and the bank pays an exit

5 fee in accordance with subsection (e).

6 ‘‘(b) EXCEPTION.—Subsection (a) shall not apply

7 with respect to—

8 ‘‘(1) an insured savings association;

9 ‘‘(2) an insured branch that is required to be

10 insured under subsection (a) or (b) of section 6 of

11 the International Banking Act of 1978; or

12 ‘‘(3) any institution described in section 2(c)(2)

13 of the Bank Holding Company Act of 1956.

14 ‘‘(c) ELIGIBILITY FOR INSURANCE TERMINATED.—

15 Any bank that voluntarily elects to terminate the bank’s

16 insured status under subsection (a) shall not be eligible

17 for insurance on any deposits or any assistance authorized

18 under this Act after the period specified in subsection

19 (f)(1).

20 ‘‘(d) INSTITUTION MUST BECOME WHOLESALE FI21 NANCIAL INSTITUTION OR TERMINATE DEPOSIT-TAKING

22 ACTIVITIES.—Any depository institution which voluntarily

23 terminates such institution’s status as an insured deposi24 tory institution under this section may not, upon termi25 nation of insurance, accept any deposits unless the institu-
168

HR 4182 IH

1 tion is either a State member wholesale financial institu2 tion under section 9B of the Federal Reserve Act, or a

3 national wholesale financial institution under section

4 5136B of the Revised Statutes of the United States.

5 ‘‘(e) EXIT FEES.—

6 ‘‘(1) IN GENERAL.—Any bank that voluntarily

7 terminates such bank’s status as an insured deposi8 tory institution under this section shall pay an exit

9 fee in an amount that the Corporation determines is

10 sufficient to account for the institution’s pro rata

11 share of the amount (if any) which would be re12 quired to restore the relevant deposit insurance fund

13 to the fund’s designated reserve ratio as of the date

14 the bank provides a written notice under subsection

15 (a)(1).

16 ‘‘(2) PROCEDURES.—The Corporation shall pre17 scribe, by regulation, procedures for assessing any

18 exit fee under this subsection.

19 ‘‘(f) TEMPORARY INSURANCE OF DEPOSITS INSURED

20 AS OF TERMINATION.—

21 ‘‘(1) TRANSITION PERIOD.—The insured depos22 its of each depositor in a State bank or a national

23 bank on the effective date of the voluntary termi24 nation of the bank’s insured status, less all subse25 quent withdrawals from any deposits of such deposi-
169

HR 4182 IH

1 tor, shall continue to be insured for a period of not

2 less than 6 months and not more than 2 years, as

3 determined by the Corporation. During such period,

4 no additions to any such deposits, and no new de5 posits in the depository institution made after the ef6 fective date of such termination shall be insured by

7 the Corporation.

8 ‘‘(2) TEMPORARY ASSESSMENTS; OBLIGATIONS

9 AND DUTIES.—During the period specified in para10 graph (1) with respect to any bank, the bank shall

11 continue to pay assessments under section 7 as if

12 the bank were an insured depository institution. The

13 bank shall, in all other respects, be subject to the

14 authority of the Corporation and the duties and obli15 gations of an insured depository institution under

16 this Act during such period, and in the event that

17 the bank is closed due to an inability to meet the de18 mands of the bank’s depositors during such period,

19 the Corporation shall have the same powers and

20 rights with respect to such bank as in the case of

21 an insured depository institution.

22 ‘‘(g) ADVERTISEMENTS.—

23 ‘‘(1) IN GENERAL.—A bank that voluntarily

24 terminates the bank’s insured status under this sec25 tion shall not advertise or hold itself out as having
170

HR 4182 IH

1 insured deposits, except that the bank may advertise

2 the temporary insurance of deposits under sub3 section (f) if, in connection with any such advertise4 ment, the advertisement also states with equal prom5 inence that additions to deposits and new deposits

6 made after the effective date of the termination are

7 not insured.

8 ‘‘(2) CERTIFICATES OF DEPOSIT, OBLIGATIONS,

9 AND SECURITIES.—Any certificate of deposit or

10 other obligation or security issued by a State bank

11 or a national bank after the effective date of the vol12 untary termination of the bank’s insured status

13 under this section shall be accompanied by a con14 spicuous, prominently displayed notice that such cer15 tificate of deposit or other obligation or security is

16 not insured under this Act.

17 ‘‘(h) NOTICE REQUIREMENTS.—

18 ‘‘(1) NOTICE TO THE CORPORATION.—The no19 tice required under subsection (a)(1)(A) shall be in

20 such form as the Corporation may require.

21 ‘‘(2) NOTICE TO DEPOSITORS.—The notice re22 quired under subsection (a)(1)(B) shall be—

23 ‘‘(A) sent to each depositor’s last address

24 of record with the bank; and
171

HR 4182 IH

1 ‘‘(B) in such manner and form as the Cor2 poration finds to be necessary and appropriate

3 for the protection of depositors.’’.

4 (b) DEFINITION.—Section 19(b)(1)(A)(i) of the Fed5 eral Reserve Act (12 U.S.C. 461(b)(1)(A)(i)) is amended

6 after ‘‘such Act’’ by inserting ‘‘, or any State member

7 wholesale financial institution as defined in section 9B of

8 this Act or any national wholesale financial institution as

9 defined in section 5136B of the Revised Statutes of the

10 United States’’.

11 (c) REPORTS ON DISCOUNTS AND ADVANCES TO

12 WHOLESALE FINANCIAL INSTITUTIONS.—Section 10B of

13 the Federal Reserve Act (12 U.S.C. 347(b)) is amended

14 by adding at the end the following new subsection:

15 ‘‘(c) REPORTS ON DISCOUNTS AND ADVANCES TO

16 WHOLESALE FINANCIAL INSTITUTIONS.—

17 ‘‘(1) IN GENERAL.—The Board shall submit a

18 report to the Congress at the end of any year in

19 which any State member wholesale financial institu20 tion or national wholesale financial institution (as

21 defined in section 5136B of the Revised Statutes of

22 the United States) has obtained a discount, advance,

23 or other extension of credit from a Federal reserve

24 bank.
172

HR 4182 IH

1 ‘‘(2) CONTENTS.—Any report submitted under

2 paragraph (1) shall explain the circumstances and

3 need for any discount, advance, or other extension of

4 credit to a wholesale financial institution during the

5 period covered by the report, including the type and

6 amount of credit extended and the amount of credit

7 remaining outstanding as of the date of the report.’’.

8 TITLE V—MERGER OF BANK AND THRIFT

9 CHARTERS, REGULATORS, AND INSUR10 ANCE FUNDS

11 Subtitle A—Conversion of Thrift Charters

12 SEC. 501. SHORT TITLE.

13 This title may be cited as the Thrift Charter Conver14 sion Act of 1996.

15 SEC. 502. TERMINATION OF FEDERAL SAVINGS ASSOCIA16 TIONS; TREATMENT OF STATE SAVINGS ASSO17 CIATIONS AS BANKS FOR PURPOSES OF FED18 ERAL BANKING LAW.

19 (a) TERMINATION OF FEDERAL SAVINGS ASSOCIA20 TION CHARTERS.—

21 (1) IN GENERAL.—Each Federal savings asso22 ciation shall—

23 (A) convert to a national bank charter;

24 (B) convert to a State depository institu25 tion charter; or
173

HR 4182 IH

1 (C) surrender the charter of such savings

2 association and liquidate the institution.

3 (2) CONVERSION TO NATIONAL BANK BY OPER4 ATION OF LAW.—If any Federal savings association

5 has not taken any action required under paragraph

6 (1) as of January 1, 1998, the savings association

7 shall—

8 (A) become a national bank on such date

9 by operation of law;

10 (B) immediately file articles of association

11 and an organizational certificate with the

12 Comptroller of the Currency in accordance with

13 sections 5133, 5134, and 5135 of the Revised

14 Statutes of the United States; and

15 (C) cease to exist as a Federal savings as16 sociation as of such date.

17 (3) PROHIBITION ON NEW CHARTERS OF FED18 ERAL SAVINGS ASSOCIATIONS.—The Director of the

19 Office of Thrift Supervision may not grant any char20 ter for a Federal savings association for which an

21 application was received after the date of the enact22 ment of this Act.

23 (b) TREATMENT OF STATE SAVINGS ASSOCIATIONS

24 AS BANKS FOR PURPOSES OF FEDERAL BANKING LAW.—
174

HR 4182 IH

1 (1) AMENDMENTS TO FEDERAL DEPOSIT IN2 SURANCE ACT.—Section 3 of the Federal Deposit

3 Insurance Act (12 U.S.C. 1813) is amended—

4 (A) by striking paragraph (2) of subsection

5 (a) and inserting the following new paragraph:

6 ‘‘(2) STATE BANK.—

7 ‘‘(A) IN GENERAL.—The term ‘State bank’

8 means any bank, banking association, trust

9 company, savings bank, industrial bank (or

10 similar depository institution which the Board

11 of Directors finds to be operating substantially

12 in the same manner as an industrial bank),

13 building and loan association, savings and loan

14 association, homestead association, cooperative

15 bank, or other banking institution—

16 ‘‘(i) which is engaged in the business

17 of receiving deposits, other than trust

18 funds (as defined in this section); and

19 ‘‘(ii) which—

20 ‘‘(I) is incorporated under the

21 laws of any State;

22 ‘‘(II) is organized and operating

23 according to the laws of the State in

24 which such institution is chartered or

25 organized; or
175

HR 4182 IH

1 ‘‘(III) is operating under the

2 Code of Law for the District of Co3 lumbia (except a national bank).

4 ‘‘(B) CERTAIN INSURED BANKS IN5 CLUDED.—The term ‘State bank’ includes a co6 operative bank or other unincorporated bank

7 the deposits of which were insured by the Cor8 poration on the day before the date of the en9 actment of the Financial Institutions Reform

10 Recovery, and Enforcement Act of 1989.

11 ‘‘(C) CERTAIN UNINSURED BANKS EX12 CLUDED.—The term ‘State bank’ does not in13 clude any cooperative bank or other unincor14 porated bank the deposits of which were not in15 sured by the Corporation on the day before the

16 date of the enactment of the Financial Institu17 tions Reform, Recovery, and Enforcement Act

18 of 1989.’’; and

19 (B) in subsection (q)—

20 (i) by inserting ‘‘and’’ after the semi21 colon at the end of paragraph (2);

22 (ii) by striking ‘‘; and’’ at the end of

23 paragraph (3) and inserting a period; and

24 (iii) by striking paragraph (4).
176

HR 4182 IH

1 (2) AMENDMENTS TO THE BANK HOLDING

2 COMPANY ACT OF 1956.—Section 2 of the Bank

3 Holding Company Act of 1956 (12 U.S.C. 1841) is

4 amended—

5 (A) by striking subparagraph (E) of sub6 section (a)(5); and

7 (B) by striking subparagraphs (B) and (J)

8 of subsection (c)(2).

9 (3) AMENDMENTS TO THE FEDERAL RESERVE

10 ACT.—The 2d and 3d paragraphs of the 1st section

11 of the Federal Reserve Act (12 U.S.C. 221) are each

12 amended by inserting ‘‘(as defined in section 3(a)(2)

13 of the Federal Deposit Insurance Act)’’ after ‘‘State

14 bank’’.

15 (c) COMPARABILITY OF REGULATION FOR STATE16 CHARTERED DEPOSITORY INSTITUTIONS.—

17 (1) REVIEW OF STATE SUPERVISION.—The

18 Corporation shall maintain procedures for reviewing,

19 under standards the Board of Directors shall pre20 scribe in regulations, the manner in which State de21 pository institutions are regulated by a State for the

22 purpose of ensuring that State savings associations

23 are no less rigorously regulated by a State than

24 State banks.
177

HR 4182 IH

1 (2) INADEQUATE STATE REGULATIONS.—If, in

2 connection with a review of State regulation of State

3 depository institutions pursuant to paragraph (2),

4 the Corporation determines that a State regulates

5 savings associations chartered by such State less rig6 orously than the State regulates banks chartered by

7 such State, the Corporation may take such action

8 under section 8(a) of the Federal Deposit Insurance

9 Act as the Corporation determines to be appropriate

10 which shall be effective no later than the end of the

11 1-year period beginning on the date of such deter12 mination.

13 (3) DEFINITIONS.—The following definitions

14 shall apply for purposes of this subsection:

15 (A) STATE BANK.—The term ‘‘State

16 bank’’ has the same meaning as in section

17 3(a)(2) of the Federal Deposit Insurance Act

18 (as in effect on the date of the enactment of the

19 Thrift Charter Conversion Act of 1996).

20 (B) STATE SAVINGS ASSOCIATION.—The

21 term ‘‘State savings association’’ has the same

22 meaning as in section 3(b)(2) of the Federal

23 Deposit Insurance Act (as in effect on the date

24 of the enactment of the Thrift Charter Conver25 sion Act of 1996).
178

HR 4182 IH

1 (C) STATE DEPOSITORY INSTITUTION.—

2 The term ‘‘State depository institution’’ has the

3 same meaning as in section 3(c)(5) of the Fed4 eral Deposit Insurance Act.

5 SEC. 503. TREATMENT OF CERTAIN ACTIVITIES AND AFFILI6 ATIONS OF BANK HOLDING COMPANIES RE7 SULTING FROM THIS ACT.

8 Section 4 of the Bank Holding Company Act of 1956

9 (12 U.S.C. 1843) is amended by adding at the end the

10 following new subsection:

11 ‘‘(k) TREATMENT OF COMPANIES RESULTING FROM

12 SAVINGS AND LOAN HOLDING COMPANIES.—

13 ‘‘(1) IN GENERAL.—Notwithstanding any other

14 provision of this section (other than paragraph (5))

15 or any other provision of Federal law including sec16 tions 20 and 32 of the Banking Act of 1933, a

17 qualified bank holding company may, after such

18 company becomes a bank holding company—

19 ‘‘(A) maintain or enter into any non-bank20 ing affiliation which such company was author21 ized to maintain or enter into as of September

22 22, 1995, or was authorized to maintain follow23 ing a merger of insured depository institution

24 subsidiaries pursuant to an application filed no

25 later than such date; and
179

HR 4182 IH

1 ‘‘(B) engage, directly or through any affili2 ate described in subparagraph (A) which is not

3 a bank, in any activity in which such company

4 or any affiliate described in subparagraph (A)

5 was authorized to engage as of September 22,

6 1995, or in which such company was authorized

7 to engage following a merger of insured deposi8 tory institution subsidiaries pursuant to an ap9 plication filed no later than such date, if the re10 quirements of paragraph (4) are met.

11 ‘‘(2) QUALIFIED BANK HOLDING COMPANY DE12 FINED.—For purposes of this subsection, the term

13 ‘qualified bank holding company’ means—

14 ‘‘(A) any company—

15 ‘‘(i) which—

16 ‘‘(I) as of September 13, 1995, is

17 a savings and loan holding company;

18 or

19 ‘‘(II) as of September 30, 1995,

20 has filed an application to charter a

21 de novo Federal savings association

22 and thereafter becomes a savings and

23 loan holding company by virtue of the

24 establishment of such savings associa25 tion; and
180

HR 4182 IH

1 ‘‘(ii) which as of the dates referred to

2 in subclause (I) or (II), as the case may

3 be, is not a bank holding company and be4 comes a bank holding company after such

5 date, or any subsidiary of such company;

6 and

7 ‘‘(B) any bank holding company which as

8 of September 13, 1995—

9 ‘‘(i) is a savings and loan holding

10 company; and

11 ‘‘(ii) is exempt from this section pur12 suant to an order issued by the Board

13 under subsection (d).

14 ‘‘(3) NO LOSS OF SUBSECTION (d) EXEMP15 TION.—No qualified bank holding company de16 scribed in paragraph (2)(B) shall lose the grounds

17 for the exemption under subsection (d) because a

18 savings association which such company controlled,

19 directly or indirectly, as of September 13, 1995, be20 comes a bank after such date so long as such bank

21 continues to meet the requirements of subpara22 graphs (A) and (B) of paragraph (4).

23 ‘‘(4) PREREQUISITES FOR CONTINUATION OF

24 GRANDFATHERED ACTIVITIES AND AFFILIATIONS.—

25 This subsection shall cease to apply with respect to
181

HR 4182 IH

1 a qualified bank holding company if, at any time

2 after such company first meets the definition of a

3 qualified bank holding company—

4 ‘‘(A) any insured depository institution

5 controlled by such company which, as of the

6 day before the company first meets the defini7 tion of a qualified bank holding company—

8 ‘‘(i) was subject to the requirements

9 contained in section 10(m) of the Home

10 Owners’ Loan Act, as in effect on such

11 date, (and regulations in effect on such

12 date under such section) for treatment as

13 a qualified thrift lender under such section;

14 and

15 ‘‘(ii) was not a savings association de16 scribed in section 10(m)(3)(F) of such Act,

17 as in effect on such date,

18 fails to meet any requirement of such section;

19 ‘‘(B) any insured depository institution

20 controlled by such company fails to comply with

21 any limitation or restriction on the type of

22 amounts of loans or investments of the institu23 tion to which such institution was subject as of

24 the date of the enactment of the Thrift Charter

25 Conversion Act of 1996, other than any limita-
182

HR 4182 IH

1 tion relating to qualified thrift investments

2 under section 10(m) of the Home Owners’ Loan

3 Act, as in effect on such date;

4 ‘‘(C) the company or any subsidiary of the

5 company acquires more than 5 percent of the

6 shares or assets of any bank or any savings as7 sociation (as such term is defined in section 3

8 of the Federal Deposit Insurance Act, as in ef9 fect on the date of the enactment of the Thrift

10 Charter Conversion Act of 1996) after Septem11 ber 13, 1995.

12 ‘‘(5) NONTRANSFERABLE.—This subsection

13 shall not apply with respect to any qualified bank

14 holding company if, after September 13, 1995—

15 ‘‘(A) any person not under common control

16 with such company acquires, directly or indi17 rectly, control of the company; or

18 ‘‘(B) the company is the subject of any

19 merger, consolidation, or other similar trans20 action as a result of which a person not under

21 common control with such company acquires,

22 directly or indirectly, control of such company.

23 ‘‘(6) PROHIBITION ON CERTAIN INSURED DE24 POSITORY INSTITUTIONS IDENTIFYING THEMSELVES

25 AS NATIONAL BANKS.—
183

HR 4182 IH

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

2 requirement of section 5134 of the Revised

3 Statutes of the United States—

4 ‘‘(i) the name of an insured depository

5 institution subsidiary of a qualified bank

6 holding company which—

7 ‘‘(I) as of the date of the enact8 ment of the Thrift Charter Conversion

9 Act of 1996, is a savings and loan

10 holding company described in section

11 10(c)(3) of the Home Owners’ Loan

12 Act (as in effect on such date); and

13 ‘‘(II) is subject to the restrictions

14 contained in paragraph (4),

15 may not include the term ‘‘national’’; and

16 ‘‘(ii) such insured depository institu17 tion may not be identified as a national

18 bank on any sign displayed by the institu19 tion or in any advertisement or other pub20 lication of the institution.

21 ‘‘(B) DEPOSITORY INSTITUTION NOT LIA22 BLE FOR FRAUDULENT MISREPRESENTATION

23 FOR NOT REPRESENTING ITSELF AS A NA24 TIONAL BANK.—An insured depository institu25 tion which is subject to subparagraph (A) shall
184

HR 4182 IH

1 not be liable for any civil or criminal penalty

2 under any Federal or State consumer protection

3 law, or in any criminal or civil action, for fraud4 ulently misrepresenting the nature of the char5 ter of the institution, for falsely advertising the

6 status of the institution, for making a false

7 statement with respect to the status of the in8 stitution, or for any similar offense by reason of

9 the institution’s compliance with such subpara10 graph.

11 ‘‘(7) ENFORCEMENT.—In addition to any other

12 power of the Board, the Board may enforce compli13 ance with the provisions of this subsection with re14 spect to any qualified bank holdling company and

15 any bank controlled by such company under section

16 8 of the Federal Deposit Insurance Act.’’.

17 SEC. 504. TRANSITION PROVISIONS FOR ACTIVITIES OF

18 SAVINGS ASSOCIATIONS WHICH CONVERT

19 INTO OR BECOME TREATED AS BANKS.

20 (a) IN GENERAL.—Notwithstanding any other provi21 sion of Federal law, any insured depository institution

22 which, as of September 13, 1995, is a savings association

23 (as defined in section 3(b) of the Federal Depository In24 surance Act (as in effect on such date)) and after such

25 date converts to a national or State bank charter or be-
185

HR 4182 IH

1 comes treated as a State bank pursuant to the amendment

2 made by section 502(b), may continue to engage, directly

3 or indirectly, in any activity in which such institution was

4 lawfully engaged as of such date during the 2-year period

5 beginning on the effective date of such conversion or the

6 effective date of such amendments, as the case may be.

7 (b) TWO 1-YEAR EXTENSIONS AUTHORIZED.—The

8 2-year period described in subsection (a) with respect to

9 any insured depository institution may be extended for

10 such institution not to exceed two additional times for not

11 more than 1 year each time if the appropriate Federal

12 banking agency determines that such extension is nec13 essary to avert substantial loss to the institution and is

14 otherwise consistent with the safety and soundness of the

15 institution.

16 SEC. 505. REGISTRATION OF BANK HOLDING COMPANIES

17 RESULTING FROM CONVERSIONS OF SAV18 INGS ASSOCIATIONS TO BANKS OR TREAT19 MENT OF SAVINGS ASSOCIATIONS AS BANKS.

20 Section 3 of the Bank Holding Company Act of 1956

21 (12 U.S.C. 1842) is amended by adding at the end the

22 following new subsections:

23 ‘‘(h) REGISTRATION OF CERTAIN BANK HOLDING

24 COMPANIES.—A company which, as of September 13,

25 1995, is a savings and loan holding company (as defined
186

HR 4182 IH

1 in section 10(a)(1)(D) of the Home Owners’ Loan Act,

2 as in effect on such date) and is not a bank holding com3 pany shall not be required to obtain the approval of the

4 Board under subsection (a) to become a bank holding com5 pany after September 13, 1995, as a result of the conver6 sion of any insured depository institution subsidiary of

7 such company into a bank or by virtue of the treatment

8 of any insured depository institution subsidiary of such

9 company as a bank pursuant to the amendments made

10 by the Thrift Charter Conversion Act of 1996, if such

11 company—

12 ‘‘(1) registers as a bank holding company with

13 the Board in accordance with section 5(a); and

14 ‘‘(2) does not acquire, directly or indirectly,

15 ownership or control of any additional insured de16 pository institution or other company in connection

17 with such conversion or treatment.

18 ‘‘(i) REGULATION OF QUALIFIED BANK HOLDING

19 COMPANIES.—The Board shall regulate qualified bank

20 holding companies (as defined in section 4(k)(2)) in a

21 manner consistent with—

22 ‘‘(1) the regulation of such companies by the

23 Director of the Office of Thrift Supervision before

24 the date of the enactment of the Thrift Charter Con25 version Act of 1996; and
187

HR 4182 IH

1 ‘‘(2) the safety and soundness of insured depos2 itory institution subsidiaries of such companies.’’.

3 SEC. 506. ADDITIONAL TRANSITION PROVISIONS AND SPE4 CIAL RULES.

5 (a) MUTUAL NATIONAL BANKS AUTHORIZED; CON6 VERSION OF MUTUAL SAVINGS ASSOCIATIONS INTO NA7 TIONAL BANKS.—

8 (1) IN GENERAL.—Chapter one of title LXII of

9 the Revised Statutes of the United States (12

10 U.S.C. 21 et seq.) is amended by inserting after sec11 tion 5133 the following new section:

12 ‘‘SEC. 5133A. MUTUAL NATIONAL BANKS.

13 ‘‘(a) IN GENERAL.—Notwithstanding the paragraph

14 designated the ‘‘Third’’ of sectin 5134, the Comptroller

15 of the Currency may charter national banks organized in

16 the mutual form either de novo or through a conversion

17 of any stock national or State bank (as defined in section

18 3 of the Federal Deposit Insurance Act) or any State mu19 tual bank or credit union, subject to regulations prescribed

20 by the Comptroller of the Currency in accordance with this

21 section.

22 ‘‘(b) REGULATIONS.—

23 ‘‘(1) TRANSITION RULES.—National banks or24 ganized in the mutual form shall be subject to the

25 regulations of the Director of the Office of Thrift
188

HR 4182 IH

1 Supervision governing corporate organization, gov2 ernance, and conversion of mutual institutions, as in

3 effect on September 13, 1995, including parts 543,

4 544, 546, 563b, and 563c) of chapter V of title 12

5 of the Code of Federal Regulations (as in effect on

6 such date), during the 3-year period beginning on

7 the date of the enactment of the Thrift Charter Con8 version Act of 1996.

9 ‘‘(2) REGULATIONS OF THE COMPTROLLER.—

10 The Comptroller of the Currency shall prescribe ap11 propriate regulations for national banks organized in

12 the mutual form, effective as of the end of the 3-

13 year period referred to in paragraph (1).

14 ‘‘(3) APPLICABILITY OF CAPITAL STOCK RE15 QUIREMENTS.—The Comptroller of the Currency

16 shall prescribe regulations regarding the manner in

17 which requirements of title LXII of the Revised

18 Statutes of the United States with respect to capital

19 stock, and limitations imposed on national banks

20 under such title based on capital stock, shall apply

21 to national banks organized in mutual form pursu22 ant to subsection (a).

23 ‘‘(c) CONVERSIONS.—

24 ‘‘(1) CONVERSION TO STOCK NATIONAL

25 BANK.—Subject to such regulations as the Comp-
189

HR 4182 IH

1 troller of the Currency may prescribe for the protec2 tion of depositors’ rights and for any other purpose

3 the Comptroller ofthe Currency may consider appro4 priate, any national bank which is organized in mu5 tual form pursuant to paragraph (1) may reorganize

6 as a stock national bank.

7 ‘‘(2) CONVERSIONS TO STATE BANKS.—Any na8 tional mutual bank may convert to a State bank

9 charter in accordance with regulations prescribed by

10 the Comptroller of the Currency and applicable

11 State law.’’.

12 (2) MUTUAL BANK HOLDING COMPANIES.—

13 Subsection (g) of section 3 of the Bank Holding

14 Company Act of 1956 (12 U.S.C. 1842(g)) is

15 amended to read as follows:

16 ‘‘(g) MUTUAL BANK HOLDING COMPANIES.—

17 ‘‘(1) IN GENERAL.—A national mutual bank

18 may reorganize so as to become a holding company

19 by—

20 ‘‘(A) chartering an interim national bank,

21 the stock of which is to be wholly owned, except

22 as otherwise provided in this section by the na23 tional mutual bank; and

24 ‘‘(B) transferring the substantial part of

25 the national mutual bank’s assets and liabil-
190

HR 4182 IH

1 ities, inclding all of the bank’s insured liabil2 ities, to the interim national bank.

3 ‘‘(2) DIRECTORS AND CERTAIN ACCOUNT HOLD4 ERS’’ APPROVAL OF PLAN REQUIRED.—A reorga5 nization is not authorized under this subsection un6 less—

7 ‘‘(A) a plan providing for such reorganiza8 tion has been approved by a majority of the

9 board of directors of the national mutual bank;

10 and

11 ‘‘(B) in the case of a national mutual bank

12 in which holders of accounts and obligers exer13 cise voting rights, such plan has been submited

14 to an approved by a majority of such individ15 uals at a meeting held at the call of the direc16 tors in accordance with the procedures pre17 scribed by the bank’s charter and bylaws.

18 ‘‘(3) NOTICE TO THE BOARD; DISAPPROVAL PE19 RIOD.—

20 ‘‘(A) NOTICE REQUIRED.—

21 ‘‘(i) IN GENERAL.—At least 60 days

22 before taking any action described in para23 graph (1), a national mutual bank seeking

24 to establish a mutual holding company

25 shall provide written notice to the Board.
191

HR 4182 IH

1 ‘‘(ii) CONTENTS OF NOTICE.—The no2 tice shall contain such relevant information

3 as the Board shall require by regulation or

4 by specific request in connection with any

5 particular notice.

6 ‘‘(B) TRANSACTION ALLOWED IF NOT DIS7 APPROVED.—Unless the Board within such 60-

8 day notice period disapproves the proposed

9 holding company formation, or extends for an10 other 30 days the period during which such dis11 approval may be issued, the national mutual

12 bank providing such notice may proceed with

13 the transaction, if the requirements of para14 graph (2) have been met.

15 ‘‘(C) GROUNDS FOR DISAPPROVAL.—The

16 Board may disapprove any proposed holding

17 company formation only if—

18 ‘‘(i) such disapproval is necessary to

19 prevent unsafe or unsound practices;

20 ‘‘(ii) the financial or management re21 sources of the national mutual bank in22 volved warrant disapproval;

23 ‘‘(iii) the national mutual bank fails

24 to furnish the information required under

25 subparagraph (A); or
192

HR 4182 IH

1 ‘‘(iv) the national mutual bank fails to

2 comply with the requirement of paragraph

3 (2).

4 ‘‘(D) RETENTION OF CAPITAL ASSETS.—In

5 connection with the transaction described in

6 paragraph (1), a national mutual bank may,

7 subject to the approval of the Board, retain

8 capital assets at the holding company level to

9 the extent that the capital retained at the hold10 ing company is in excess of the amount of cap11 ital required in order for the interim national

12 bank to meet all relevant capital standards es13 tablished by the Comptroller of the Currency

14 for national banks.

15 ‘‘(4) OWNERSHIP.—

16 ‘‘(A) IN GENERAL.—Persons having own17 ership rights in the national mutual bank under

18 section 5133A of the Revised Statutes of the

19 United States (including paragraph 575.5 of

20 chapter V of title 12 of the Code of Federal

21 Regulations, as in effect on September 13,

22 1995, and applicable to national mutual banks

23 pursuant to such section) or State law shall

24 have the same ownership rights with respect to

25 the mutual holding company.
193

HR 4182 IH

1 ‘‘(B) HOLDERS OF CERTAIN ACCOUNTS.—

2 Holders of savings, demand, or other accounts

3 of—

4 ‘‘(i) a national bank chartered as part

5 of a transaction described in paragraph

6 (1); or

7 ‘‘(ii) a mutual bank acquired pursuant

8 to paragraph (5)(B),

9 shall have the same ownership rights with re10 spect to the mutual holding company as persons

11 described in subparagraph (A) of this para12 graph.

13 ‘‘(5) PERMITTED ACTIVITIES.—A mutual hold14 ing company may engage only in the following activi15 ties:

16 ‘‘(A) Investing in the stock of a national or

17 State bank.

18 ‘‘(B) Acquiring a mutual bank through the

19 merger of such bank into a national bank sub20 sidiary of such holding company or an interim

21 national bank subsidiary of such holding com22 pany.

23 ‘‘(C) Subject to paragraph (6), merging

24 with or acquiring another holding company, one

25 of whose subsidiaries is a national mutual bank.
194

HR 4182 IH

1 ‘‘(D) Investing in a corporation the capital

2 stock of which is available for purchase by a na3 tional mutual bank under Federal law or under

4 the law of any State where the home office of

5 any subsidiary bank is located.

6 ‘‘(E) Engaging in the activities permitted

7 under section 4(c).

8 ‘‘(6) LIMITATIONS ON CERTAIN ACTIVITIES OF

9 ACQUIRED HOLDING COMPANIES.—

10 ‘‘(A) NEW ACTIVITIES.—If a mutual hold11 ing company acquires or merges with another

12 holding company under paragraph (5)(C), the

13 holding company acquired or the holding com14 pany resulting from such merger or acquisition

15 may only invest in assets and engage in activi16 ties which are authorized under paragraph (5).

17 ‘‘(B) GRACE PERIOD FOR DIVESTING PRO18 HIBITED OR DISCONTINUING PROHIBITED AC19 TIVITIES.—Not later than 2 years following a

20 merger or acquisition described in paragraph

21 (5)(C), the acquired holding company or the

22 holding company resulting from such merger or

23 acquisition shall—
195

HR 4182 IH

1 ‘‘(i) dispose of any asset which is an

2 asset in which a mutual holding company

3 may not invest under paragraph (5); and

4 ‘‘(ii) cease any activity which is an ac5 tivity in which a mutual holding company

6 may not engage under paragraph (5).

7 ‘‘(7) CHARTERING AND OTHER REQUIRE8 MENTS.—

9 ‘‘(A) IN GENERAL.—A mutual holding

10 company shall be chartered by the Board and

11 shall be subject to such regulations as the

12 Board may prescribe.

13 ‘‘(B) OTHER REQUIREMENTS.—Unless the

14 context otherwise required, a mutual holding

15 company shall be subject to the other require16 ments of this Act regarding regulation of hold17 ing companies.

18 ‘‘(8) CAPITAL IMPROVEMENT.—

19 ‘‘(A) PLEDGE OF STOCK OF SAVINGS ASSO20 CIATION SUBSIDIARY.—This section shall not

21 prohibit a mutual holding company from pledg22 ing all or a portion of the stock of a national

23 bank chartered as part of a transaction de24 scribed in paragraph (1) to raise capital for

25 such bank.
196

HR 4182 IH

1 ‘‘(B) ISSUANCE OF NONVOTING SHARES.—

2 No provision of this Act shall be construed as

3 prohibiting a national bank chartered as part of

4 a transaction described in paragraph (1) from

5 issuing any nonvoting shares or less than 50

6 percent of the voting shares of such bank to

7 any person other than the mutual holding com8 pany.

9 ‘‘(9) INSOLVENCY AND LIQUIDATION.—

10 ‘‘(A) IN GENERAL.—Notwithstanding any

11 provision of law, upon—

12 ‘‘(i) the default of any national

13 bank—

14 ‘‘(I) the stock of which is owned

15 by any mutual holding company; and

16 ‘‘(II) which was chartered in a

17 transaction described in paragraph

18 (1);

19 ‘‘(ii) the default of a mutual holding

20 company; or

21 ‘‘(iii) a foreclosure on a pledge by a

22 mutual holding company described in para23 graph (8)(A),

24 A trustee shall be appointed receiver of such

25 mutual holding company and such trustee shall
197

HR 4182 IH

1 have the authority to liquidate the assets of,

2 and satisfy the liabilities of, such mutual hold3 ing company pursuant to title 11, United States

4 Code.

5 ‘‘(B) DISTRIBUTION OF NET PROCEEDS.—

6 Except as provided in subparagraph (C), the

7 net proceeds of any liquidation of any mutual

8 holding company pursuant to subparagraph (A)

9 shall be transferred to persons who hold owner10 ship interests in such mutual holding company.

11 ‘‘(C) RECOVERY BY FEDERAL DEPOSIT IN12 SURANCE CORPORATION.—If the Federal De13 posit Insurance Corporation incurs a loss as a

14 result of the default of any depository institu15 tion subsidiary of a mutual holding company

16 which is liquidated pursuant to subparagraph

17 (A), the Federal Deposit Insurance Corporation

18 shall succeed to the ownership interest of the

19 depositors of such depository institution in the

20 mutual holding company, to the extent of the

21 Federal Deposit Insurance Corporation’s loss.

22 ‘‘(10) STATE MUTUAL BANK HOLDING COM23 PANY.—

24 ‘‘(A) IN GENERAL.—Notwithstanding any

25 provision of Federal law, a State bank operat-
198

HR 4182 IH

1 ing in mutual form may reorganize so as to

2 form a holding company under State law.

3 ‘‘(B) REGULATION OF STATE MUTUAL

4 HOLDING COMPANY.—A corporation organized

5 as a holding company in accordance with sub6 paragraph (A) shall be regulated on the same

7 terms and be subject to the same limitations as

8 any other holding company which controls a

9 bank.

10 ‘‘(11) REGULATIONS.—

11 ‘‘(A) TRANSITION RULES.—Mutual bank

12 holding companies organized under this sub13 section shall be subject to the regulations of the

14 Director of the Office of Thrift Supervision gov15 erning corporate organization, governance, and

16 conversion of mutual institutions, as in effect

17 on September 13, 1995, including part 575 of

18 chapter V of title 12 of the Code of Federal

19 Regulations (as in effect on such date), during

20 the 3-year period beginning on the date of the

21 enactment of the Thrift Charter Conversion Act

22 of 1996.

23 ‘‘(B) REGULATIONS OF THE BOARD.—The

24 Board shall prescribe appropriate regulations

25 for mutual holding companies, effective at the
199

HR 4182 IH

1 end of the 3-year period referred to in subpara2 graph (A).

3 ‘‘(12) NO CHANGE OF CONTROL.—Any second

4 stage conversion of a mutual holding company to full

5 stock form shall not be deemed to be a change of

6 control if, in connection with such conversion, no

7 company, directly or indirectly, acquires control of

8 such mutual holding company or any successor to

9 such company.

10 ‘‘(13) DEFINITIONS.—For purposes of this sub11 section, the following definitions shall apply:

12 ‘‘(A) MUTUAL HOLDING COMPANY.—The

13 term ‘mutual holding company’ means a cor14 poration organized as a holding company under

15 this subsection.

16 ‘‘(B) DEFAULT.—The term ‘default’

17 means an adjudication or other official deter18 mination of a court of competent jurisdiction or

19 other public authority pursuant to which a con20 servator, receiver, or other legal custodian is

21 appointed.

22 ‘‘(C) NATIONAL MUTUAL BANK.—The term

23 ‘national mutual bank’ means a national bank

24 organized in mutual form under section 5133A

25 of the Revised Statutes of the United States.’’.
200

HR 4182 IH

1 (3) LIMITATION ON FEDERAL REGULATION OF

2 STATE BANKS.—Except as otherwise provide in Fed3 eral law, the Comptroller of the Currency, Board of

4 Governors of the Federal Reserve System, and Fed5 eral Deposit Insurance Corporation may not adopt

6 or enforce any regulation which contravenes the cor7 poration governance rules prescribed by State law or

8 regulation for State banks unless the Comptroller,

9 Board, or Corporation finds that such Federal regu10 lation is necessary to assure the safety and sound11 ness of such State banks.

12 (4) CONVERSIONS OF MUTUAL SAVINGS ASSO13 CIATION TO MUTUAL NATIONAL BANKS BY OPER14 ATION OF LAW.—Notwithstanding any other provi15 sion of Federal or State law, any savings association

16 (as defined in section 3 of the Federal Deposit In17 surance Act (as in effect on September 13, 1995))

18 which is organized in mutual form as of the date of

19 the enactment of this Act may become a national

20 mutual bank by operation of law if the association—

21 (A) files the articles of association and or22 ganization certificate with the Comptroller of

23 the Currency before January 1, 1998, in ac24 cordance with chapter one of the LXII of the

25 Revised Statutes of the United States; and
201

HR 4182 IH

1 (B) provides such other document or infor2 mation as the Comptroller of the Currency may

3 prescribe in regulations consistent with this sec4 tion and section 5133A of the Revised Statutes

5 of the United States (as added by paragraph

6 (1) of this subsection).

7 (b) MEMBERSHIP IN FEDERAL HOME LOAN

8 BANKS.—Any insured depository institution which—

9 (1) as of the date of the enactment of this Act,

10 is a Federal savings association which, pursuant to

11 section 6(e) of the Federal Home Loan Bank Act,

12 may not voluntarily withdraw from membership in a

13 federal home loan bank; and

14 (2) after such date converts from a Federal

15 savings association to a national bank, shall continue

16 to be subject to the prohibition under such section

17 on voluntary withdrawal from such membership as

18 though such bank were still a Federal savings asso19 ciation until the bank ceases to be a national bank.

20 (c) BRANCHES.—

21 (1) IN GENERAL.—Notwithstanding any provi22 sion of the Federal Deposit Insurance Act, the Bank

23 Holding Company Act of 1956, or any other Federal

24 or State law, any depository institution which—
202

HR 4182 IH

1 (A) as of the date of the enactment of this

2 Act, is a savings association; and

3 (B) becomes a bank before January 1,

4 1998, or, pursuant to the amendments made by

5 this subsection, is treated as a bank as of such

6 date under the Federal Deposit Insurance Act,

7 and any depository institution or bank holding com8 pany which acquires such depository institution, may

9 continue, after the depository institution becomes or

10 commences to be treated as a bank, to operate any

11 branch or agency which the savings association was

12 operating as a branch or agency or was in the proc13 ess of establishing as a branch or agency on Septem14 ber 13, 1995.

15 (2) NO ADDITIONAL BRANCHES.—Paragraph

16 (1) shall not be construed as authorizing the estab17 lishment, acquisition, or operation of any additional

18 branch of a depository institution, or the conversion

19 of any agency to a branch, in any State by virtue

20 of the operation by such institution of a branch or

21 agency in such State pursuant to such paragraph ex22 cept to the extent such establishment, acquisition,

23 operation, or conversion is permitted under the Fed24 eral Deposit Insurance Act, Bank Holding Company
203

HR 4182 IH

1 Act of 1956, and any other applicable Federal or

2 State law.

3 (3) ESTABLISHING A BRANCH OF AGENCY.—

4 For purposes of paragraph (1), a savings association

5 shall be treated as having been in the process of es6 tablishing a branch or agency as of September 13,

7 1995, if, as of such date, the savings association—

8 (A) had received approval from the Direc9 tor of the Office of Thrift Supervision to estab10 lish such branch or agency;

11 (B) had pending with the Director of the

12 Office of Thrift Supervision an application or

13 notice to establish such branch or agency;

14 (C) had a legal and contractual obligation

15 to establish such branch or agency;

16 (D) had received authority from the appro17 priate Federal banking agency to establish such

18 branch in connection with the assumption of li19 abilities or an acquisition of an insured deposi20 tory institution pursuant to subsection (f) or

21 (k) of section 13 of the Federal Deposit Insur22 ance Act or section 408(m) of the National

23 Housing Act (as in effect before the date of the

24 enactment of the Financial Institutions Reform,

25 Recovery, and Enforcement Act of 1989); or
204

HR 4182 IH

1 (E) in the case of a well capitalized deposi2 tory institution, is able to demonstrate to the

3 appropriate Federal banking agency that the

4 savings association—

5 (i) had made a significant financial

6 commitment; and

7 (ii) had taken legally binding action or

8 incurred a contractual obligation, in fur9 therance of the establishment of such

10 branch or agency.

11 (d) TRANSITION PROVISION RELATING TO LIMITA12 TIONS ON LOANS TO ONE BORROWER.—Section 5200 of

13 the Revised Statutes of the United States (12 U.S.C. 84)

14 is amended by adding at the end the following new sub15 section:

16 ‘‘(e) TRANSITION PROVISIONS FOR SAVINGS ASSO17 CIATIONS CONVERTING TO NATIONAL BANKS.—In the

18 case of any depository institution which, as of September

19 13, 1995, is a savings association (as defined in section

20 3(b) of the Federal Deposit Insurance Act (as in effect

21 on such date)) and becomes a national bank on or before

22 January 1, 1998, any loan, or legally binding commitment

23 to make a loan, made or entered into by such institution

24 becomes a national bank may continue to be held without
205

HR 4182 IH

1 regard to any limitation contained in this section during

2 the 3-year period beginning on such date.’’.

3 (e) RIGHTS AND AUTHORITY OF BANKS RESULTING

4 FROM CONVERSIONS OF SAVINGS ASSOCIATIONS.—

5 (1) IN GENERAL.—Upon conversion of a sav6 ings association to a national or State bank in ac7 cordance with this Act and the amendments made

8 by this title or other provisions of law—

9 (A) the national or State bank shall suc10 ceed to all rights, benefits, privileges, powers

11 and franchises, and be subject to all the obliga12 tions, duties, restrictions, and disabilities, of

13 such savings association under any contract,

14 agreement, document, or instrument in effect at

15 the time of such conversion to which such sav16 ings association was a party; and

17 (B) any reference to the savings associa18 tion in any such contract, agreement, docu19 ment, or instrument shall be deemed to be a

20 reference to such national or State bank.

21 (2) TREATMENT OF BANK OR SAVINGS AS22 SOCIATION.—If the application of paragraph (1)

23 with respect to any national or State bank re24 ferred to in such paragraph would—
206

HR 4182 IH

1 (A) be inconsistent or in conflict with any

2 contract, agreement, document, or instrument

3 described in such paragraph;

4 (B) constitute a default under the con5 tract, agreement, document, or instrument;

6 (C) cause such national or State bank to

7 be in default or breach under any provision of

8 the contract, agreement, document, or instru9 ment, the national or State bank shall be

10 deemed to be, and treated as, a savings associa11 tion for purposes of the contract, agreement,

12 document, or instrument.

13 (f) TRANSFER AND GRANDFATHER OF MUTUAL

14 HOLDINGS COMPANIES.—

15 (1) SUPERVISION AND REGULATION OF MUTUAL

16 HOLDINGS COMPANIES.—

17 (A) IN GENERAL.—The supervision and

18 regulation of any mutual holding company in

19 existence as of the date of the enactment of this

20 Act is hereby transferred to the Board of Gov21 ernors of the Federal Reserve System.

22 (B) TRANSITION RULES.—Mutual bank

23 holding companies described in subparagraph

24 (A) shall be subject to the regulations of the

25 Director of the Office of Thrift Supervision, as
207

HR 4182 IH

1 in effect on September 13, 1995, including part

2 575 of chapter V of title 12 of the Code of Fed3 eral Regulations (as in effect on such date),

4 during the 3-year period beginning on the date

5 of the enactment of the Thrift Charter Conver6 sion Act of 1996.

7 (2) GRANDFATHER OF EXISTING FEDERAL MU8 TUAL HOLDING COMPANIES.—

9 (A) IN GENERAL.—Any Federal mutual

10 holding company in existence as of the date of

11 the enactment of this Act shall be subject to

12 section 4(k) of the Bank Holding Company Act

13 of 1956 (as added by section 2222 of this title).

14 (B) TREATMENT UNDER 4(K).—Any treat15 ment of a Federal mutual holding company

16 under section 4(k) shall not be construed as a

17 change in control unless, as a result of the

18 transaction, the holding company no longer con19 trols the entity.

20 SEC. 507. TECHNICAL AND CONFORMING AMENDMENTS.

21 (a) AMENDMENTS TO THE FEDERAL DEPOSIT IN22 SURANCE ACT.—

23 (1) Section 3(z) of the Federal Deposit Insur24 ance Act (12 U.S.C. 1813(z)) is amended by strik-
208

HR 4182 IH

1 ing ‘‘, the Director of the Office of Thrift Super2 vision’’.

3 (2) Section 8(b) of the Federal Deposit Insur4 ance Act (12 U.S.C. 1818(b)) is amended by strik5 ing paragraph (9).

6 (3) Section 13 of the Federal Deposit Insurance

7 Act (12 U.S.C. 1823) is amended by striking sub8 section (k).

9 (4) Subsections (c)(2) and (i)(2) of section 18

10 of the Federal Deposit Insurance Act (12 U.S.C.

11 1828) are each amended—

12 (A) in the subparagraph (B), by inserting

13 ‘‘and’’ after the semicolon;

14 (B) in subparagraph (C), by striking ‘‘;

15 and’’ and inserting a period; and

16 (C) by striking subparagraph (D).

17 (5) Section 18 of the Federal Deposit Insurance

18 Act (12 U.S.C. 1828) is amended by striking sub19 section (m).

20 (6) The Federal Deposit Insurance Act (12

21 U.S.C. 1811 et seq.) is amended by striking 28.

22 (b) AMENDMENTS TO THE BANK HOLDING COMPANY

23 ACT OF 1956.—
209

HR 4182 IH

1 (1) Section 2 of the Bank Holding Company

2 Act of 1956 (12 U.S.C. 1841) is amended by strik3 ing subsections (i) and (j).

4 (2) Section 4(c)(8) of the Bank Holding Com5 pany Act of 1956 (12 U.S.C. 1843(c)(8)) is amend6 ed by striking the sentence preceding the penul7 timate sentence.

8 (3) Section 4(f) of the Bank Holding Company

9 Act of 1956 (12 U.S.C. 1843(f) is amended—

10 (A) in paragraph (2)(A)(i), by striking ‘‘or

11 an insured institution’’ and all that follows

12 through ‘‘of this subsection)’’;

13 (B) in paragraph (2)(A)(ii)—

14 (i) by striking ‘‘or a savings associa15 tion’’ where such term appears in the por16 tion of such paragraph which precedes sub17 clause (I));

18 (ii) by inserting ‘‘and’’ at the end of

19 subclause (VI);

20 (iii) by striking subclauses (VIII),

21 (IX), and (X); and

22 (iv) by striking ‘‘(V), and (VIII)’’,

23 where such term appears in the portion of

24 such paragraph which appears after the
210

HR 4182 IH

1 end of subclause (VII), and inserting ‘‘and

2 (V)’’; and

3 (C) by striking paragraphs (10), (11),

4 (12), and (13).

5 (4) Section 4(i) of the Bank Holding Company

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

7 (A) by striking paragraphs (1) and (2);

8 and

9 (B) in paragraph (3)(A), by striking ‘‘any

10 Federal savings association’’ and all that fol11 lows through the period at the end of such

12 paragraph and inserting ‘‘such association was

13 authorized to engage under this section as of

14 September 15, 1995.’’

15 (c) OTHER TECHNICAL AND CONFORMING AMEND16 MENTS.—

17 (1) Section 804(a) of the Alternative Mortgage

18 Transaction Parity Act of 1982 (12 U.S.C. 3803) is

19 amended.—

20 (A) in the portion of such subsection which

21 precedes paragraph (1)—

22 (i) by striking ‘‘, and other nonfeder23 ally chartered housing creditors,’’; and

24 (ii) by inserting ‘‘and in order to per25 mit other nonfederally chartered housing
211

HR 4182 IH

1 creditors to make, purchase, and enforce

2 alternative mortgage transactions,’’ after

3 ‘‘enforcing alternative mortgage trans4 actions,’’; and

5 (B) in paragraph (1), by inserting ‘‘(as

6 such term is defined in section 3(a) of the Fed7 eral Deposit Insurance Act)’’ after ‘‘with re8 spect to banks’’.

9 (2) Section 205 of the Depository Institution

10 Management Interlock Act (12 U.S.C. 3204) is

11 amended.—

12 (A) in the portion of paragraph (8)(A)

13 which precedes clause (i), by striking ‘‘diversi14 fied savings’’ and all that follows through ‘‘with

15 respect to’’ and inserting ‘‘depository institution

16 holding company which, as of September 13,

17 1995, and at all times thereafter, satisfies the

18 consolidated net worth and consolidated net

19 earnings requirements for a diversified savings

20 and loan holding company (as set forth in sec21 tion 10(1)(F) of Home Owners’ Loan Act, as

22 such section is in effect on such date, which

23 shall be applicable for purposes of this para24 graph without regard to the fact that a deposi25 tory institution subsidiary of such holding com-
212

HR 4182 IH

1 pany has ceased to be a savings association

2 after September 13, 1995) with respect to’’;

3 and

4 (B) by striking paragraph (9).

5 (3) Section 19(b)(1)(A) of the Federal Reserve

6 Act (12 U.S.C. 461(b)(1)(A)) is amended—

7 (A) by inserting ‘‘and’’ after the semicolon

8 at the end of clause (v); and

9 (B) by striking clause (vi).

10 (4) Subparagraphs (A), (B), and (C) of section

11 10(e)(5) of the Federal Home Loan Bank Act (12

12 U.S.C. 1430(e)(5)) are each amended by inserting

13 before the period at the end ‘‘(as such section is in

14 effect on September 13, 1995)’’.

15 SEC. 508. REFERENCES TO SAVINGS ASSOCIATIONS AND

16 STATE BANKS IN FEDERAL LAW.

17 Effective January 1, 1998, any reference in any Fed18 eral banking law to—

19 (1) the term ‘‘savings association’’ shall be

20 deemed to be a reference to a bank as defined in

21 section 3(a) of the Federal Deposit Insurance Act;

22 and

23 (2) the term ‘‘State bank’’ shall be deemed to

24 include any depository institution included in the
213

HR 4182 IH

1 definition of such term in section 3(a)(2) of such

2 Act.

3 SEC. 509. REPEAL OF HOME OWNERS’ LOAN ACT.

4 The Home Owners’ Loan Act (12 U.S.C. 1461 et

5 seq.) is hereby repealed.

6 SEC. 510. DEFINITIONS.

7 For purposes of this subtitle, the terms ‘‘appropriate

8 Federal banking agency’’, ‘‘bank holding company’’, ‘‘de9 pository institution’’, ‘‘Federal savings association’’, ‘‘in10 sured depository institution’’, ‘‘savings association’’, and

11 ‘‘State bank’’ have the same meanings as in section 3 of

12 the Federal Deposit Insurance Act (as in effect on the

13 date of the enactment of this Act).

14 Subtitle B—Elimination of Office of The

15 Thrift Supervision

16 SEC. 511. OFFICE OF THRIFT SUPERVISION ABOLISHED.

17 Effective January 1, 1998, the Office of Thrift Su18 pervision and the position of Director of the Office of

19 Thrift Supervision are hereby abolished.

20 SEC. 512. DETERMINATION OF TRANSFERRED FUNCTIONS

21 AND EMPLOYEES.

22 (a) ALL OFFICE OF THRIFT SUPERVISION EMPLOY23 EES SHALL BE TRANSFERRED.—All employees of the Of24 fice of Thrift Supervision shall be identified for transfer

25 under subsection (b) to the Office of the Comptroller of
214

HR 4182 IH

1 the Currency, the Federal Deposit Insurance Corporation,

2 or the Board of Governors of the Federal Reserve System.

3 (b) FUNCTIONS AND EMPLOYEES TRANSFERRED.—

4 (1) IN GENERAL.—The Director of the Office of

5 Thrift Supervision, the Comptroller of the Currency,

6 the Chairperson of the Federal Deposit Insurance

7 Corporation, and the Chairman of the Board of Gov8 ernors of the Federal Reserve System shall jointly

9 determine the functions or activities of the Office of

10 Thrift Supervision, and the number of employees of

11 such Office necessary to perform or support such

12 functions or activities, which are transferred from

13 the Office to the Office of the Comptroller of the

14 Currency, the Federal Deposit Insurance Corpora15 tion, or the Board of Governors of the Federal Re16 serve System, as the case may be.

17 (2) ALLOCATION OF EMPLOYEES.—The Comp18 troller of the Currency, the Chairperson of the Fed19 eral Deposit Insurance Corporation, and the Chair20 man of the Board of Governors of the Federal Re21 serve System shall allocate the employees of the Of22 fice of Thrift Supervision consistent with the num23 ber determined pursuant to paragraph (1) in a man24 ner which such Comptroller, Chairperson, and Chair25 man, in their sole discretion, deem equitable except
215

HR 4182 IH

1 that, within work units, the agency preferences of

2 individual employees shall be accommodated as far

3 as possible.

4 (c) RIGHTS OF EMPLOYEES OF THE OFFICE OF

5 THRIFT SUPERVISION.—All employees of the Office of

6 Thrift Supervision who are identified for transfer under

7 subsection (b) shall be entitled to the following rights:

8 (1) Each employee so identified shall be trans9 ferred to the appropriate agency or entity for em10 ployment no later than the earlier of the end of the

11 60-day period beginning on the date such employees

12 are identified for transfer under subsection (b) or

13 January 1, 1998, and such transfer shall be deemed

14 a transfer of function for the purpose of section

15 3503 of title 5, United States Code.

16 (2) Each transferred employee holding a perma17 nent position shall not be involuntarily separated or

18 reduced in grade or compensation for 1 year after

19 the date of transfer, except for cause or, if the em20 ployee is a temporary employee, separated in accord21 ance with the terms of the appointment.

22 (3) If any agency or entity to which employees

23 are transferred determines, after the end of the 1-

24 year period beginning on the date the transfer of

25 functions to such agency or entity is completed, that
216

HR 4182 IH

1 a reorganization of the combined work force is re2 quired, that reorganization shall be deemed a ‘‘major

3 reorganization’’ for purposes of affording affected

4 employees retirement under section 833(d)(2) or

5 8414(b)(1)(B) of title 5, United States Code.

6 (d) DISPOSITION OF AFFAIRS.—

7 (1) IN GENERAL.—In winding up the affairs of

8 the Office of Thrift Supervision, the Director of the

9 Office of Thrift Supervision shall consult and co10 operate with the Comptroller of the Currency, the

11 Federal Deposit Insurance Corporation, and the

12 Board of Governors of the Federal Reserve System,

13 as the case may be, to facilitate the orderly transfer

14 of the functions to such Comptroller, Corporation, or

15 Board.

16 (2) CONTINUING AUTHORITY OF DIRECTOR OF

17 THE OFFICE OF THRIFT SUPERVISION.—Except as

18 provided in paragraph (1), no provision of this sub19 title shall be construed as affecting the authority

20 vested in the Director of the Office of Thrift Super21 vision before the date of enactment of this Act which

22 is necessary to carry out the duties of the position

23 until the date upon which the position of Director of

24 the Office of Thrift Supervision is abolished.
217

HR 4182 IH

1 (3) CONTINUATION OF AGENCY SERVICES.—

2 Any agency, department, or other instrumentality of

3 the United States, or any successor to any such

4 agency, department or instrumentality, which was

5 providing support services to the Director of the Of6 fice of Thrift Supervision on the day before the date

7 such position is abolished shall—

8 (A) continue to provide such services on a

9 reimbursable basis, in accordance with the

10 terms of the arrangement pursuant to which

11 such services were provided until the arrange12 ment is modified or terminated in accordance

13 with such terms, except that effective January

14 1, 1998, the Comptroller of the Currency, the

15 Federal Deposit Insurance Corporation, or the

16 Board of Governors of the Federal Reserve Sys17 tem, as the case may be, shall be substituted

18 for the Director of the Office of Thrift Super19 vision as a party to the arrangement; and

20 (B) consult with the Comptroller, the Cor21 poration, or the Board to coordinate and facili22 tate a prompt and reasonable transition.

23 (e) TRANSFER OF PROPERTY.—Effective January 1,

24 1998, all property of the Office of Thrift Supervision shall

25 be transferred to the Comptroller of the Currency, the
218

HR 4182 IH

1 Federal Deposit Insurance Corporation, or the Board of

2 Governors of the Federal Reserve System, as determined

3 in accordance with subsections (a) and (b).

4 SEC. 513. SAVINGS PROVISIONS.

5 (a) EXISTING RIGHTS, DUTIES, AND OBLIGATIONS

6 NOT AFFECTED.—No provision of this title shall be con7 strued as affecting the validity of any right, duty or obliga8 tion of the United States, the Director of the Office of

9 Thrift Supervision, or any person, which existed on the

10 day before the date upon which the position of Director

11 of the Office of Thrift Supervision and the Office of Thrift

12 Supervision are abolished.

13 (b) CONTINUATION OF SUITE.—No action or other

14 proceeding commenced by or against the Director of the

15 Office of Thrift Supervision shall abate by reason of enact16 ment of this title, except that, effective January 1, 1998,

17 the Comptroller of the Currency, the Federal Deposit In18 surance Corporation, or the Board of Governors of the

19 Federal Reserve System, as the case may be, shall be sub20 stituted as a party to any such action or proceeding.

21 (c) CONTINUATION OF ADMINISTRATIVE RULES.—

22 All orders, resolutions, determinations, regulations, inter23 pretative rules, other interpretations, guidelines, proce24 dures, supervisory and enforcement actions, and other ad25 visory material (other than any regulation implementing
219

HR 4182 IH

1 or prescribed pursuant to section 3(f) of the Home Own2 ers’ Loan Act (as in effect on September 13, 1995))

3 which—

4 (1) have been issued, made, prescribed, or per5 mitted to become effective by the Office of Thrift

6 Supervision, and

7 (2) are in effect on December 31, 1997 (or be8 come effective after such date pursuant to the terms

9 of the order, resolution, determination, rule, other

10 interpretation, guideline, procedure, supervisory or

11 enforcement action, and other advisory material, as

12 in effect on such date), shall—

13 (A) continue in effect according to the

14 terms of such orders, resolutions, determina15 tions, regulations, interpretative rules, other in16 terpretations, guidelines, procedures, super17 visory or enforcement actions, or other advisory

18 material;

19 (B) be administered by the Comptroller of

20 the Currency, the Federal Deposit Insurance

21 Corporation, or the Board of Governors of the

22 Federal Reserve System; and

23 (C) be enforceable by or against the Comp24 troller of the Currency, the Federal Deposit In25 surance Corporation, or the Board of Governors
220

HR 4182 IH

1 of the Federal Reserve System until modified,

2 terminated, set aside, or superseded in accord3 ance with applicable law by the Comptroller,

4 Corporation, or Board, by any court of com5 petent jurisdiction, or by operation of law.

6 (d) TREATMENT OF REFERENCES IN ADJUSTABLE

7 RATE MORTGAGES ISSUED BEFORE FIRREA.—

8 (1) REFERENCES IN PRIOR LAW.—For purposes

9 of section 402(e) of Financial Institutions Reform,

10 Recovery, and Enactment Act of 1989 (12 U.S.C.

11 1437 note), any reference in such section to—

12 (A) the Director of the Office of Thrift Su13 pervision shall be deemed to be a reference to

14 the Secretary of the Treasury; and

15 (B) a Savings Association Insurance Fund

16 member shall be deemed to be a reference to an

17 insured depository institution (as defined in sec18 tion 3 of the Federal Deposit Insurance Act).

19 (e) TREATMENT OF REFERENCES IN ADJUSTABLE

20 RATE MORTGAGES INSTRUMENTS ISSUED AFTER

21 FIRREA.—

22 (1) IN GENERAL.—For purposes of adjustable

23 rate mortgage instruments that are in effect as of

24 the date of enactment of this Act, any reference in

25 the instrument to the Director of the Office of
221

HR 4182 IH

1 Thrift Supervision or Savings Association Insurance

2 Fund members shall be treated as a reference to the

3 Secretary of the Treasury or insured depository in4 stitutions (as defined in section 3 of the Federal De5 posit Insurance Act), as appropriate.

6 (2) SUBSTITUTION FOR INDEXES.—If any index

7 used to calculate the applicable interest rate on any

8 adjustable rate mortgage instrument is no longer

9 calculated and made available as a direct or indirect

10 result of the enactment of this title, any index—

11 (A) made available by the Secretary of the

12 Treasury; or

13 (B) determined by the Secretary of the

14 Treasury, pursuant to paragraph (4), to be sub15 stantially similar to the index which is no

16 longer calculated or made available,

17 may be substituted by the holder of any such adjust18 able rate mortgage instrument upon notice to the

19 borrower.

20 (3) AGENCY ACTION REQUIRED TO PROVIDE

21 CONTINUED AVAILABILITY OF INDEXES.—Promptly

22 after the enactment of this subsection, the Secretary

23 of the Treasury, the Chairperson of the Federal De24 posit Insurance Corporation, and the Comptroller of

25 the Currency shall take such action as may be nec-
222

HR 4182 IH

1 essary to assure that the indexes prepared by the

2 Director of the Office of Thrift Supervision imme3 diately before the enactment of this subsection and

4 used to calculate the interest rate on adjustable rate

5 mortgage instruments continue to be available.

6 (4) REQUIREMENTS RELATING TO SUBSTITUTE

7 INDEXES.—If any agency can no longer make avail8 able an index pursuant to paragraph (3), an index

9 that is substantially similar to such index may be

10 substituted for such index for purposes of paragraph

11 (2) if the Secretary of the Treasury determines,

12 after notice and opportunity for comment, that—

13 (A) the new index is based upon data sub14 stantially similar to that of the original index;

15 and

16 (B) the substitution of the new index will

17 result in an interest rate substantially similar to

18 the rate in effect at the time the original index

19 became unavailable.

20 SEC, 514. COST OF FUNDS INDEXES.

21 (a) COST OF FUNDS INDEX DEFINED.—The term

22 ‘‘cost of funds indexed’’ means any index that is published

23 by a Federal home loan bank and is based, in whole or

24 in part, upon the cost of funds of such bank’s members.
223

HR 4182 IH

1 (b) CALCULATIONS BASED ON TYPE OF CHARTER

2 AND INSURANCE FUND MEMBERSHIP OF MEMBERS.— If

3 any cost of funds index includes data based on charter

4 type, insurance fund membership, or other similar charac5 teristics of members of a Federal home loan ban, such

6 index shall be calculated after the date of the enactment

7 of this Act using data only from insured depository insti8 tutions which were bank members and whose data was in9 cluded in such index on or before such date of enactment.

10 (c) ACQUISITION OF DATA.—

11 (1) IN GENERAL.—Each insured depository in12 stitution the data from which is required to compile

13 a cots of funds index in accordance with subsection

14 (b) shall provide to the Federal home loan bank

15 which maintains the index such information as may

16 be necessary, and in such form as may be appro17 priate, for the bank to calculate and publish the

18 index.

19 (2) ENFORCEMENT BY BANKING AGENCIES.—

20 Each appropriate Federal banking agency shall take

21 such action as may be necessary to ensure that in22 sured depository institutions which are required to

23 provide information to any Federal home loan bank

24 under paragraph (1) furnish such information on a

25 timely basis and in the form required by the bank.
224

HR 4182 IH

1 (3) TREATMENT OF INSTITUTIONS.—Notwith2 standing any other provision of law, an insured de3 pository institution which furnishes information to a

4 Federal home loan bank pursuant to this section for

5 use in compiling a cost of funds index shall not be

6 deemed to control, directly, or indirectly, such index.

7 (d) CERTAIN DATA EXCLUDED.—Notwithstanding

8 subsections (b) and (c), no cost of funds index shall in9 clude any data from any insured depository institution

10 which results from the merger, consolidation, or other

11 combination of a member of a Federal home loan bank

12 with a nonmember of any such bank if—

13 (1) the total assets of the nonmember exceed

14 the total assets of the bank member at the time of

15 such merger, consolidation, or other combination; or

16 (2) in the case of a merger, consolidation, or

17 other merger in which a member of a Federal home

18 loan bank is the resulting insured depository institu19 tion, combined ration of the average amount of sin20 gle-family loan balances to average total assets of all

21 insured depository institutions involved in such

22 merger, consolidation, or other combination for the

23 12-months period ending on the date of such trans24 action is less than 70 percent.
225

HR 4182 IH

1 (e) OTHER DEFINITIONS.—For purposes of this sec2 tion, the terms ‘‘appropriate Federal banking agency’’ and

3 ‘‘insured depository institution’’ shall have the same

4 meanings as in section 3 of the Federal Deposit Insurance

5 Act.

6 SEC. 515. REFERENCES IN FEDERAL LAW TO DIRECTOR OF

7 THE OFFICE OF THRIFT SUPERVISION.

8 Effective January 1, 1998, any reference in any Fed9 eral law to the Director of the office of Thrift Supervision

10 or the Office of Thrift supervision shall be deemed to be

11 a reference to the appropriate Federal banking agency (as

12 defined in section 3(q) of the Federal Deposit insurance

13 Act).

14 SEC. 516. RECONFIGURATION OF BOARD OF DIRECTORS OF

15 FDIC AS A RESULT OF REMOVAL OF DIREC16 TOR OF THE OFFICE OF THRIFT SUPER17 VISION.

18 (a) IN GENERAL.—Section 2(a)(1) of the Federal

19 Deposit Insurance Act (12 U.S.C. 1812(a)(1)) is amended

20 to read as follows:

21 ‘‘(1) IN GENERAL.—The management of the

22 Corporation shall be vested in a Board of Directors

23 consisting of 5 members—

24 (A) 1 of whom shall be the Comptroller of

25 the Currency; and
226

HR 4182 IH

1 (B) 4 of whom shall be appointed by the

2 President, and with the advice and consent of

3 the Senate, from among individuals who are

4 citizens of the United States, 1 of whom shall

5 have State bank supervisory experience’’.

6 (b) TECHNICAL AND CONFORMING AMENDMENTS.—

7 (1) Section 2(d)(2) of the Federal Deposit In8 surance Act (12 U.S.C. 1812(d)(2)) is amended—

9 (A) by striking ‘‘or the Office of Director

10 of the Office of Thrift Supervision’’;

11 (B) by striking ‘‘or such Director’’;

12 (C) by striking ‘‘or the acting Director of

13 the Office of Thrift Supervision, as the case

14 may be’’; and

15 (D) by striking ‘‘or Director’’.

16 (2) Section 2(f)(2) of the Federal Deposit In17 surance Act (12 U.S.C. 1812(f)(2)) is amended by

18 striking ‘‘or of the Office of Thrift Supervision’’.

19 (c) EFFECTIVE DATE.—The amendments made by

20 subsections (a) and (b) shall take effect on January 1,

21 1998.

22 Subtitle C—Merger of BIF and SAIF

23 SEC. 521. AMENDMENT TO BUDGET RECONCILIATION ACT.

24 Section 2013(c) of the Budget Reconciliation Act is

25 amended to read as follows:
227

HR 4182 IH

1 ‘‘(c) EFFECTIVE DATE.—This section and the

2 amendments made by this section shall become effective

3 on January 1, 1997.’’.

4 TITLE VI—NATIONAL MARKET FUNDING

5 LENDING INSTITUTIONS

6 SEC. 601. NATIONAL MARKET FUNDED LENDING INSTITU7 TIONS.

8 Chapter 1 of title LXII of the Revised Statutes of

9 the United States is amended by adding the following sec10 tion:

11 ‘‘SEC. 5158. NATIONAL MARKET FUNDED LENDING INSTITU12 TIONS.

13 ‘‘(a) NATIONAL MARKET FUNDED LENDING INSTI14 TUTIONS.—

15 ‘‘(1) ORGANIZATION OF NATIONAL MARKET

16 FUNDED LENDING INSTITUTIONS.—Any company

17 (as defined in section 2(b) of the Bank Holding

18 Company Act of 1956 (12 U.S.C. 1841(b)) or any

19 number of natural persons, not less in any case than

20 five, may apply to the Comptroller of the Currency

21 on such forms and in accordance with such proce22 dures as the Comptroller may prescribe by regula23 tion, for permission to organize a national market

24 funded lending institution. Upon approval of the ap25 plication, such national market funded lending insti-
228

HR 4182 IH

1 tution shall be a body corporate, chartered under the

2 laws of the United States by the Comptroller. All

3 national market funded lending institutions shall op4 erate pursuant to the requirements of this section at

5 the direction of a board of directors elected at an or6 ganizational meeting to be held as soon as prac7 ticable after issuance by the Comptroller of a charter

8 by such company or such natural persons for the

9 purpose of electing such board of directors and tak10 ing such other action necessary, pursuant to the

11 charter and the regulations issued by the Comptrol12 ler, to complete the corporate organization of the na13 tional market funded lending institution. Imme14 diately following their election, the board of directors

15 shall meet to elect officers of the national market

16 funded lending institution and to take such other ac17 tion, as prescribed by the Comptroller, to complete

18 the corporate organization of such national market

19 funded lending institution.

20 ‘‘(2) UNAUTHORIZED ORGANIZATION PROHIB21 ITED.—No company or person may organize a na22 tional market funded lending institution, collect

23 money from others for such purpose, or represent it24 self, himself, or herself as authorized to do so and

25 no national market funded lending institution shall
229

HR 4182 IH

1 transact any business prior to completion of its or2 ganization except as provided in this Act and in im3 plementing regulations of the Comptroller.

4 ‘‘(3) AUTHORIZED ACTIVITIES FOR NATIONAL

5 MARKET-FUNDED LENDING INSTITUTION.—Subject

6 to the provisions of paragraphs (4) and (5) of this

7 subsection, and subsections (b) and (c) of this sec8 tion, a national market funded lending institution

9 may exercise, in accordance with its articles of orga10 nization and such regulations as are issued by the

11 Comptroller, all of the powers and privileges of a na12 tional banking association formed in accordance with

13 section 5133 of the Revised Statutes (12 U.S.C. 21).

14 ‘‘(4) PROHIBITION OF TAKING DEPOSITS OR

15 RECEIVING FEDERAL DEPOSIT INSURANCE.—No na16 tional market funded lending institution may—

17 (A) become an ‘‘insured depository institu18 tion’’ within the meaning of section 3(c)(2) of

19 the Federal Deposit Insurance Act (12 U.S.C.

20 1813(c)(2)) or acquire, directly or indirectly

21 through a subsidiary, control of such an insured

22 depository institution;

23 (B) accept any deposits as defined in sec24 tion (3)(l)(1) of the Federal Deposit Insurance

25 Act (12 U.S.C. 1813(l)(1);
230

HR 4182 IH

1 (C) advertise or hold itself out as having

2 deposits insured by the Federal Deposit Insur3 ance Corporation.

4 ‘‘(5) PROHIBITION ON ACCESS TO DISCOUNT

5 WINDOW.—No national market funded lending insti6 tution may exercise discount borrowing privileges

7 pursuant to section 19*b)(7) of the Federal Reserve

8 Act.

9 ‘‘(6) PROHIBITION ON ACCESS TO PAYMENTS

10 SYSTEM.—No national market funded lending insti11 tution may obtain payment or payment related serv12 ices from any Federal Reserve bank, including any

13 service referred to in section 11A of the Federal Re14 serve Act.

15 ‘‘(7) CAPITAL.—The capital of national market

16 funded lending institution shall be maintained at all

17 times at such level and in such manner as may be

18 prescribed by the Comptroller by regulation.

19 ‘‘(8) PROHIBITION ON IDENTIFICATION AS A

20 BANK.—

21 ‘‘(A) In general.—Notwithstanding the re22 quirement of section 5134 of the Revised Stat23 utes of the United States—
231

HR 4182 IH

1 ‘‘(i) the name of a national market

2 lending institution may not include the

3 term ‘‘bank’’; and

4 ‘‘(ii) such institution may not be iden5 tified as a bank on any sign displayed by

6 the institution or in any advertisement or

7 other publication of the institution.

8 ‘‘(B) DEPOSITORY INSTITUTION NOT LIA9 BLE FOR FRAUDULENT MISREPRESENTATION

10 FOR NOT REPRESENTING ITSELF AS A BANK.—

11 A national market lending institution shall not

12 be liable for any civil or criminal penalty under

13 any Federal or State consumer protection law,

14 or in any criminal or civil action, for falsely ad15 vertising the status of the institution, for mak16 ing a false statement with respect to the status

17 of the institution, or for any similar offense by

18 reason of the institution’s compliance with this

19 paragraph.

20 ‘‘(9) IMPLEMENTING REGULATIONS.—The

21 Comptroller shall promulgate such regulations as

22 may be necessary to implement the provisions of this

23 section.

24 ‘‘(b) REGULATION AND SUPERVISION OF NATIONAL

25 MARKET FUNDED LENDING INSTITUTION.—
232

HR 4182 IH

1 ‘‘(1) AUTHORITY VESTED IN COMPTROLLER OF

2 THE CURRENCY.—Notwithstanding any other provi3 sion of law, the authority to regulate and supervise

4 the activities of national market funding lending in5 stitutions shall be vested exclusively in the Comptrol6 ler of the Currency.

7 ‘‘(2) EXAMINATION.—Each national market

8 funded lending institution and each subsidiary there9 of shall be subject to such examinations and to such

10 reporting and recordkeeping requirements as the

11 Comptroller may prescribe. The cost of examinations

12 shall be assessed against and paid by such national

13 market funded lending institution. Examiners ap14 pointed by the Comptroller for the purposes of this

15 Act shall be subject to the same requirements, re16 sponsibilities, and penalties as are applicable to ex17 aminers under the Federal Reserve Act and title

18 LXII of the Revised Statutes and shall have, in the

19 exercise of functions under this Act, the same pow20 ers and privileges as are vested in such examiners

21 by law. If any national market funded lending insti22 tution fails to pay any assessment required under

23 this subsection within 60 days of such assessment,

24 or refuses to permit any examiner appointed by the

25 Comptroller to make an examination, or refuses to
233

HR 4182 IH

1 provide any information required to be disclosed by

2 regulation or in the course of any examination, or

3 submits or publishes any false or misleading report

4 or information, the Comptroller may assess against

5 such national market funded lending institution civil

6 penalty of not more than $5,000 for each day any

7 such failure or refusal continues. And such civil pen8 alty shall be assessed by the Comptroller in a man9 ner prescribed in subparagraphs (E), (F), (G), (I)

10 and (J) of section 8(i)(2) of the Federal Deposit In11 surance Act, for penalties imposed by such section,

12 and such assessment shall also be subject to the pro13 visions of subparagraph (H) of that section and of

14 section 8(h) of that Act.

15 ‘‘(3) ENFORCEMENT.—

16 ‘‘(A) CAPITAL.—If any national market

17 funded lending institution fails to maintain cap18 ital at or above the minimum level prescribed

19 by the Comptroller’s regulations, the Comptrol20 ler may issue a directive requiring the national

21 market funded lending institution to submit

22 and adhere to a plan for increasing capital

23 which is acceptable to the Comptroller. Any

24 such directive, and such plan when approved by
234

HR 4182 IH

1 the Comptroller, shall be enforceable as pro2 vided in this paragraph.

3 ‘‘(B) CEASE-AND-DESIST AUTHORITY.—If

4 a national market funded lending institution

5 subject to a capital directive issued pursuant to

6 subparagraph (A) fails to submit or adhere to

7 a plan for increasing capital which is acceptable

8 to the Comptroller, or if the Comptroller has

9 reasonable cause to believe that any national

10 market funded lending institution has accepted

11 any deposit or has taken action which has

12 caused it to become an ‘‘insured depository in13 stitution’’ within the meaning of section 3(c)(2)

14 of the Federal Deposit Insurance Act or has

15 represented to any person that any amount ac16 cepted by such national market funded lending

17 institution is an ‘‘insured deposit’’ within the

18 meaning of section 3(m) of Federal Deposit In19 surance Act, the Comptroller may issue and

20 serve upon such national market funded lending

21 institution a notice of charges which shall con22 tain a statement of the facts constituting the

23 alleged violation or violations of this Act and

24 shall fix a time and a place at which a hearing

25 will be held to determine whether an order to
235

HR 4182 IH

1 cease-and-desist therefrom should be issued

2 against the national market funded lending in3 stitution. Such hearing shall be fixed for a date

4 not earlier than 30 days nor later than 60 days

5 after service of such notice unless an earlier or

6 later date is set by the Comptroller at the re7 quest of the national market funded lending in8 stitution. Unless the institution so served shall

9 appear at the hearing, it shall be deemed to

10 have consented to the issuance of the cease-and11 desist order. In the event of such consent, or if

12 upon the record made at any such hearing the

13 Comptroller shall find that any violation or vio14 lations specified in the notice of charges has or

15 have been established, the Comptroller may

16 issue an order to cease-and-desist from any

17 such violation or violations and, in an appro18 priate case as determined by the Comptroller in

19 his or her discretion, to take affirmative action

20 to correct the conditions resulting from any

21 such violation or violations. Such order shall be22 come effective at the expiration of 30 days after

23 service thereof upon the national market funded

24 lending institution (except in the case of a

25 cease-and-desist order issued upon consent,
236

HR 4182 IH

1 which shall become effective at the time speci2 fied therein), and shall remain effective and en3 forceable, as provided therein except as stayed,

4 modified, terminated or set aside by action of

5 the Comptroller or reviewing court. Any hearing

6 provided for in this subsection and judicial re7 view of any final cease-and-desist order (other

8 than a cease-and-desist order issued upon con9 sent, which shall be unreviewable) shall be in

10 accordance with the provisions of section 8(h)

11 of the Federal Deposit Insurance Act.

12 ‘‘(C) CIVIL MONEY PENALTY.—Any person

13 who violates, or has caused a national market

14 funded lending institution to violate any cease15 and-desist order issued pursuant to subpara16 graph (B) shall forfeit and pay a civil penalty

17 of not more than $100,000 for each day during

18 which such violation continues. Any such civil

19 penalty shall be assessed and collected by the

20 Comptroller in the manner provided in subpara21 graphs (E), (F), (G), (I), and (J) of section

22 8(i)(2) of the Federal Deposit Insurance Act,

23 and any such assessment shall be subject to the

24 provisions of subparagraph (H) of that section

25 and of section 8(h) of that Act.
237

HR 4182 IH

1 ‘‘(D) CHARTER REVOCATION.—If the

2 Comptroller determines that any national mar3 ket funded lending institution has violated any

4 cease-and-desist order which was issued under

5 subparagraph (B) of this paragraph and which

6 has become final, the Comptroller may, in addi7 tion to or in lieu of any other remedies provided

8 by law, issue an order revoking the charter of

9 such national market funded lending institu10 tion. Any order revoking the charter of a na11 tional market funded lending institution shall

12 be effected within 20 days of service upon such

13 national market funded lending institution un14 less stayed, modified, terminated or set aside by

15 a court in proceedings authorized in this sub16 paragraph. The national market funded lending

17 institution shall give notice of such revocation

18 order to each of its depositors in such manner

19 and at such times as the Comptroller may deem

20 necessary and may order for the protection of

21 the depositors. Any national market funded

22 lending institution served with an order revok23 ing its charter, may, within 10 days of the date

24 of service of such order, apply to the United

25 States District Court for the District of Colum-
238

HR 4182 IH

1 bia or the United States District Court for the

2 judicial district in which the home office of such

3 national market funded lending institution is lo4 cated for an injunction setting aside, limiting,

5 modifying, or suspending the enforcement, oper6 ation, or effectiveness of such order, and such

7 court shall have jurisdiction to issue such in8 junction. Failure to seek judicial review within

9 such 10 day period shall constitute a waiver

10 thereof and shall constitute consent by the na11 tional market funded lending institution or any

12 company which controls such national market

13 funded lending institution to the issuance of a

14 final order of revocation of its charter.

15 ‘‘(c) CRIMINAL PENALTIES.—

16 ‘‘(1) UNAUTHORIZED ORGANIZATION.—Any

17 person who violates the provisions of this title or any

18 regulation or order issued by the Comptroller pursu19 ant hereto by knowingly organizing a national mar20 ket funded lending institution, collecting money from

21 others for such purpose, or representing himself or

22 herself as authorized to do so, or transacting busi23 ness as a national market lending institution, with24 out a validly issued and unrevoked charter from the

25 Comptroller of the Currency, or, in the case of a na-
239

HR 4182 IH

1 tional market funded lending institution which has

2 had its charter revoked, by failing to give notice to

3 depositors of charter revocation when and as di4 rected by the Comptroller under this section, shall

5 be imprisoned not more than one year, fined not

6 more than $100,000 for each day during which such

7 violation continues, or both.

8 ‘‘(2) VIOLATION OF ACTIVITIES LIMITATION.—

9 Whoever violates this section by knowingly causing

10 a national market funded lending institution to ac11 cept any deposit or by representing to any person

12 that any deposit accepted by such national market

13 funded lending institution is an ‘‘insured deposit’’

14 within the meaning of section 3(m) of Federal De15 posit Insurance Act (12 U.S.C. 1813(m)) shall be

16 imprisoned not more than 5 years, fined not more

17 than $500,000 per day for each day during which

18 such violation continues, or both.

19 ‘‘(3) VIOLATION DEFINED.—For purposes of

20 this section, the term ‘‘violation’’ includes any action

21 (alone or with another or others) for or toward caus22 ing, bringing about, participating in, counseling or

23 aiding or abetting a violation.

24 ‘‘(d) VOLUNTARY LIQUIDATION.—A national market

25 funded lending institution may go into voluntary liquida-
240

HR 4182 IH

1 tion and be closed by a vote of its shareholders owning

2 two-thirds of its stock, pursuant to sections 5220 and

3 5221 of the Revised States (12 U.S.C. 181, 182).

4 ‘‘(e) CONSERVATORSHIP.—The Comptroller may ap5 point a conservator to take possession and control of a

6 national market funded lending institution pursuant to the

7 Bank Conservation Act (12 U.S.C. 201 et seq.).

8 ‘‘(f) CONVERSIONS OF DEPOSITORY INSTITUTIONS

9 INTO NATIONAL MARKET FUNDED LENDING INSTITU10 TIONS.—Any depository institution (as defined in section

11 3(c)(1) of the Federal Deposit Insurance Act) may, by the

12 vote of its shareholders owning not less than two-thirds

13 of the stock of such depository institution, and with the

14 approval of the Comptroller upon such terms as he or she

15 shall determine are necessary to further the purposes of

16 this section, be converted into a national market funded

17 lending institution, provided, however that said conversion

18 shall not be in contravention of any applicable State law.

19 Such national market funded lending institution shall have

20 the same powers and privileges and shall be subject to the

21 same duties, liabilities and regulations in all respects, as

22 national market funded lending institutions originally or23 ganized under this section.’’.
241

HR 4182 IH

1 TITLE VII—EFFECTIVE DATE

2 SEC. 701. EFFECTIVE DATE.

3 This Act shall become effective on January 1, 1997.

Æ