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‘‘(ii) both the principal of and the in-
terest on the extension of credit are fully
secured by those securities;
‘‘(iii) either—
‘‘(I) the extension of credit is to
be repaid on the same calendar day;
or
‘‘(II) all of the following condi-
tions are satisfied:
‘‘(aa) the securities cannot,
in the ordinary course of busi-
ness, be cleared on that calendar
day;
‘‘(bb) the extension of credit
is to be repaid before the close of
business on the next calendar
day; and
‘‘(cc) extensions of credit
under this subclause, when ag-
gregated with all other covered
transactions between the institu-
tion and all affiliated securities
affiliates do not exceed 10 per-
cent of the institution’s capital
stock and surplus; and
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‘‘(iv) either—
‘‘(I) the securities are securities
expressly specified by section 5136 of
the Revised Statutes as permissible
for a national bank to underwrite or
deal in; or
‘‘(II) to the extent that the
Board permits transactions under this
paragraph in securities not described
in subclause (I), the securities affiliate
provides the insured depository insti-
tution such additional security or
other assurance of performance, if
any, as the Board shall require to pre-
vent such transactions from posing
any appreciable risk to the institution.
‘‘(C) OTHER
EXCEPTIONS.—The Board
may make exceptions to subparagraph (A) for
well capitalized insured depository institutions
if—
‘‘(i) the transaction is fully secured in
accordance with section 23A(c) of the Fed-
eral Reserve Act; and
‘‘(ii) the aggregate amount of covered
transactions between the institution and all
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securities affiliates of the financial services
holding company, excluding transactions
permitted under subparagraph (A)(iii)(I)
or (B)(iii)(I), does not exceed 10 percent
of the institution’s capital stock and sur-
plus.
‘‘(2) CREDIT ENHANCEMENT RESTRICTED.—
‘‘(A) IN GENERAL.—No insured depository
institution affiliated with a securities affiliate
shall, directly or indirectly, extend credit, or
issue or enter into a standby letter of credit,
asset purchase agreement, indemnity, guaran-
tee, insurance, or other facility, for the purpose
of enhancing the marketability of a securities
issue underwritten by the securities affiliate.
‘‘(B) EXCEPTIONS.—The Board may make
exceptions to subparagraph (A)—
‘‘(i) for well capitalized insured depos-
itory institutions if—
‘‘(I) the insured depository insti-
tution has adopted appropriate limits
on exposure on a consolidated basis to
any single customer whose securities
are underwritten by the securities af-
filiate; and
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‘‘(II) the institution and its secu-
rities affiliate have adopted appro-
priate procedures, including mainte-
nance 
of 
necessary 
documentary
records, to assure that any such ex-
tension of credit, standby letter of
credit, asset purchase agreement, in-
demnity, 
guarantee, 
insurance 
or
other facility, is on an arm’s length
basis. An extension of credit is consid-
ered to be on an arm’s length basis if
the terms and conditions are substan-
tially the same as those prevailing at
the time for comparable transactions
involving securities that are not un-
derwritten by the securities affiliate;
or
‘‘(ii) for securities expressly specified
by section 5136 of the Revised Statutes as
permissible for a national bank to under-
write or deal in.
‘‘(3) PROHIBITION
ON
FINANCING
PURCHASE
OF SECURITY BEING UNDERWRITTEN.—
‘‘(A) IN GENERAL.—No financial services
holding company or subsidiary of a financial
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services holding company (other than a securi-
ties affiliate) shall knowingly extend or arrange
for the extension of credit, directly or indirectly,
secured by or for the purpose of purchasing any
security while, or for 30 days after, that secu-
rity is the subject of a distribution in which a
securities affiliate of that financial services
holding company participates as an underwriter
or a member of a selling group. For purposes
of this subparagraph, a financial services hold-
ing company or subsidiary may rely on an ex-
press written acknowledgement signed by the
borrower that the credit is not secured by or for
the purpose of purchasing a security described
in this subparagraph.
‘‘(B) EXCEPTIONS.—The Board may make
exceptions to subparagraph (A)—
‘‘(i) for extensions of credit if the se-
curities are securities expressly specified by
section 5136 of the Revised Statutes as
permissible for a national bank to under-
write or deal in;
‘‘(ii) for any other extension of credit,
after consultation with and considering the
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views of the Securities and Exchange Com-
mission, if—
‘‘(I) the financial services holding
company is adequately capitalized,
‘‘(II) the financial services hold-
ing company’s lead insured depository
institution is well capitalized, and
‘‘(III) well capitalized insured de-
pository institutions control at least
80 percent of the assets of insured de-
pository institutions controlled by the
financial services holding company
and all insured depository institutions
controlled by the financial services
holding company are well capitalized
or adequately capitalized.
‘‘(C) CONSISTENCY
WITH
THE
FEDERAL
SECURITIES LAWS.—Nothing in this paragraph
shall permit a securities affiliate to extend or
maintain credit or arrange for an extension of
credit except in compliance with applicable pro-
visions of the Securities Exchange Act of 1934
and the rules and interpretations thereunder.
‘‘(4) RESTRICTIONS ON EXTENDING CREDIT TO
MAKE PAYMENTS ON SECURITIES.—
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sion of credit by the depository institution
to an issuer for the purpose of paying the
principal, interest or dividends on securi-
ties underwritten by the securities affiliate
is on an arm’s length basis. An extension
of credit is considered to be on an arm’s
length basis if the terms and conditions
are substantially the same as those prevail-
ing at the time for comparable transactions
with issuers whose securities are not un-
derwritten by the securities affiliate; or
‘‘(ii) the securities are securities ex-
pressly specified by section 5136 of the Re-
vised Statutes as permissible for a national
bank to underwrite to deal in.’’.
‘‘(5) DIRECTOR AND SENIOR EXECUTIVE OFFI-
CER INTERLOCKS RESTRICTED.—
‘‘(A) IN GENERAL.—No director or senior
executive officer of a securities affiliate shall
serve at the same time as a director or senior
executive officer of any affiliated insured depos-
itory institution.
‘‘(B) EXCEPTION FOR SMALL FINANCIAL
SERVICES
HOLDING
COMPANIES.—Notwith-
standing subparagraph (A), a director or senior
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executive officer of a securities affiliate may
serve at the same time as a director or senior
executive officer of an affiliated insured deposi-
tory institution if that institution and all affili-
ated insured depository institutions have, in the
aggregate, total assets of not more than
$500,000,000. The dollar limitation in the pre-
ceding sentence shall be adjusted annually after
December 31, 1995, by the annual percentage
increase in the Consumer Price Index for
Urban Wage Earners and Clerical Workers
published by the Bureau of Labor Statistics.
‘‘(C) BOARD’S AUTHORITY TO MAKE EX-
CEPTIONS.—
‘‘(i) IN GENERAL.—The Board may,
by regulation or order, make exceptions to
subparagraph (A).
‘‘(ii) STANDARDS.—The Board—
‘‘(I) shall, in determining wheth-
er to make such exceptions, consider
the size of the financial services hold-
ing companies, insured depository in-
stitutions, and securities affiliates in-
volved, any burdens that may be im-
posed by subparagraph (A), the safety
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and soundness of the insured deposi-
tory institutions and securities affili-
ates, and other appropriate factors,
including unfair competition in securi-
ties activities or the improper ex-
change of nonpublic customer infor-
mation; and
‘‘(II) shall not permit—
‘‘(aa) more than half of the
insured depository institution’s
directors to be directors or senior
executive officers of the securities
affiliate; or
‘‘(bb) more than half of the
securities affiliate’s directors to
be directors or senior executive
officers of the insured depository
institution.
‘‘(D) SENIOR
EXECUTIVE
OFFICER
DE-
FINED.—For purposes of this paragraph, the
term ‘senior executive officer’ has the same
meaning as the term ‘executive officer’ has in
section 22(h) of the Federal Reserve Act.
‘‘(6) DISCLOSURE
REQUIRED
BY
SECURITIES
AFFILIATE.—At the time a securities account is
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opened, a securities affiliate shall conspicuously dis-
close in writing to each of its customers that—
‘‘(A) securities sold, offered, or rec-
ommended by the securities affiliate are not de-
posits, are not insured by the Federal Deposit
Insurance Corporation, are not guaranteed by
an affiliate insured depository institution, and
are not otherwise an obligation of an insured
depository institution (unless such is the case);
‘‘(B) the securities affiliate is not an in-
sured depository institution, and is a corpora-
tion separate from any insured depository insti-
tution; and
‘‘(C) the securities affiliate may be under-
writing or dealing in the securities being sold,
offered or recommended, and if so, would have
a financial interest in the transaction.
‘‘(7) DISCLOSURE REQUIRED BY INSURED DE-
POSITORY INSTITUTIONS.—No insured depository in-
stitution shall knowingly express any opinion on the
value of, or the advisability of purchasing or selling,
non-deposit investment products being underwritten
or dealt in by the insured depository institution or
any affiliate thereof unless the insured depository in-
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stitution conspicuously discloses in writing to the
customer that—
‘‘(A) the insured depository institution or
affiliate (whichever is applicable) is underwrit-
ing or dealing in the non-deposit investment
product and has a financial interest in the
transaction;
‘‘(B) the non-deposit investment products
are not deposits, are not insured by the Federal
Deposit Insurance Corporation, are not guaran-
teed by the institution or any other affiliated
insured depository institution, and are not oth-
erwise an obligation of an insured depository in-
stitution (unless such is the case), and, with re-
gard to any non-deposit investment product
that includes any investment component, are
subject to investment risks including possible
loss of principal invested; and
‘‘(C) an affiliate, if involved, is not an in-
sured depository institution (unless such is the
case), and is a corporation separate from any
insured depository institution (unless such is
the case).
‘‘(8) IMPROPER DISCLOSURE OF CONFIDENTIAL
CUSTOMER INFORMATION PROHIBITED—
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‘‘(A) IN GENERAL.—No insured depository
institution subsidiary of a financial services
holding company shall disclose to a securities
affiliate of that financial services holding com-
pany, nor shall a securities affiliate disclose to
any affiliated insured depository institution or
subsidiary of such an institution, any nonpublic
customer information (including an evaluation
of the creditworthiness of an issuer or other
customer of that institution or securities affili-
ate), unless it is clearly and conspicuously dis-
closed that such information may be commu-
nicated among such persons and the customer
is given the opportunity, prior to the time that
the information is initially communicated, to di-
rect that such information not be communicated
among such persons.
‘‘(B) DEFINITION.—For purposes of sub-
paragraph (A), the term ‘nonpublic customer
information’ does not include—
‘‘(i) customers’ names and addresses
(unless a customer has specified other-
wise);
‘‘(ii) information that could be ob-
tained from unaffiliated credit bureaus or
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similar companies in the ordinary course of
business; or
‘‘(iii) information that is customarily
provided to unaffiliated credit bureaus or
similar companies in the ordinary course of
business by—
‘‘(I) insured depository institu-
tions not affiliated with securities af-
filiates; or
‘‘(II) brokers and dealers not af-
filiated with insured depository insti-
tutions.
‘‘(9) UNDERWRITING SECURITIES REPRESENT-
ING
OBLIGATIONS
ORIGINATED
BY
AFFILIATE
RE-
STRICTED.—A securities affiliate shall not under-
write securities secured by or representing an inter-
est in mortgages or other obligations originated or
purchased by an affiliated insured depository institu-
tion or subsidiary of such an institution—
‘‘(A) unless those securities—
‘‘(i) are rated by at least 1 unaffili-
ated, nationally recognized statistical rat-
ing organization;
‘‘(ii) are issued or guaranteed by the
Federal Home Loan Mortgage Corpora-
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tion, the Federal National Mortgage Asso-
ciation, or the Government National Mort-
gage Association; or
‘‘(iii) represent interests in securities
described in clause (ii); or
‘‘(B) except as permitted by the Board.
‘‘(10) RECIPROCAL
ARRANGEMENTS
PROHIB-
ITED.—No financial services holding company and
no subsidiary of a financial services holding company
may enter into any agreement, understanding, or
other arrangement under which—
‘‘(A) one financial services holding com-
pany (or subsidiary of that financial services
holding company) agrees to engage in a trans-
action with, or in behalf of, another financial
services holding company (or subsidiary of that
financial services holding company), in ex-
change for
‘‘(B) the agreement of the second financial
services holding company referred to in sub-
paragraph (A) (or a subsidiary of that financial
services holding company) to engage in any
transaction with, or on behalf of, the first fi-
nancial services holding company referred to in
that subparagraph (or any subsidiary of that fi-
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nancial services holding company), for the pur-
pose of evading any requirement or restriction
of Federal law on transactions between, or for
the benefit of, affiliates of financial services
holding companies.
‘‘(11) SAFEGUARDS APPLY TO CERTAIN SUB-
SIDIARIES.—Except as provided in this subsection:
‘‘(A) SECURITIES AFFILIATE.—No subsidi-
ary of a securities affiliate may do anything
that this subsection prohibits the securities af-
filiate from doing.
‘‘(B) DEPOSITORY INSTITUTION.—No sub-
sidiary of an insured depository institution or of
a wholesale financial institution may do any-
thing that this subsection prohibits the institu-
tion from doing.
‘‘(12) AUTHORITY TO MODIFY AND IMPOSE AD-
DITIONAL
SAFEGUARDS; 
INTERPRETIVE
AUTHOR-
ITY.—
‘‘(A) IN GENERAL.—The Board may, by
regulation or order—
‘‘(i) adopt additional limitations, re-
strictions or conditions on relationships or
transactions among insured depository in-
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stitutions, their affiliates, and their cus-
tomers; and
‘‘(ii) make any modification to any
limitation, restriction or condition on rela-
tionships or transactions among insured
depository institutions, their affiliates and
their customers imposed under this sub-
section, including modifications in addition
to those expressly provided for in this sub-
section.
‘‘(B) STANDARDS.—The Board may not
exercise authority under subparagraph (A)(i) or
subparagraph (A)(ii) unless the Board finds
that such action is consistent with the purposes
of this Act, including the avoidance of any sig-
nificant risk to the safety and soundness of in-
sured depository institutions or the federal de-
posit insurance funds, enhancement of the fi-
nancial stability of financial services holding
companies, prevention of the subsidization of
securities affiliates by insured depository insti-
tutions, avoidance of conflicts of interest or
other abuses, and application of the principle of
national treatment and equality of competitive
opportunity between securities affiliates owned
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or controlled by domestic financial services
holding companies and securities affiliates
owned or controlled by foreign banks operating
in the United States.
‘‘(13) COMPLIANCE PROGRAMS REQUIRED.—
‘‘(A) IN
GENERAL.—Each appropriate
Federal banking agency and the Securities and
Exchange Commission shall establish a program
for—
‘‘(i) sharing information concerning
compliance with subtitles A, B, or C of
title I of the Financial Services Competi-
tiveness Act of 1995 by—
‘‘(I) entities that are brokers,
dealers, investment advisers or invest-
ment companies registered with the
Securities and Exchange Commission
that are affiliated with insured deposi-
tory institutions, or are separately
identifiable departments or divisions
of insured depository institutions reg-
istered as investment advisers; and
‘‘(II) such insured depository in-
stitutions and their affiliates;
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‘‘(ii) enforcing compliance with sub-
title A of title I of the Financial Services
Competitiveness Act of 1995 and section
3(a)(4) and 3(a)(5) of the Securities Ex-
change Act of 1934 by entities under its
supervision; and
‘‘(iii) responding to any complaints
from customers about inappropriate cross-
marketing of securities products or inad-
equate disclosure.
(B) DATA COLLECTION.—
‘‘(i) IN
GENERAL.—The appropriate
Federal banking agencies, after consulta-
tion with and consideration of the views of
the Securities and Exchange Commission,
may require any depository institution that
has effected securities transactions pursu-
ant to any exception enumerated in sec-
tions 3(a)(4)(C) and 3(a)(5) of the Securi-
ties Exchange Act of 1934 to identify the
exceptions relied upon and to submit such
information necessary to monitor compli-
ance under sections 3(a)(4)(C) and 3(a)(5)
of the Securities Exchange Act of 1934.
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‘‘(ii) COMMISSION ACCESS.—The ap-
propriate Federal banking agency shall
make any such information available to the
commission upon request.
‘‘(iii) COMPLIANCE.—In implementing
the provisions of this subparagraph, the
appropriate Federal banking agencies shall
ensure that any information requests to in-
sured depository institutions take into ac-
count the size and activities of the institu-
tions and do not cause undue reporting
burdens.
‘‘(C) COMMISSION’S
ENFORCEMENT
AU-
THORITY.—Without limiting in any way the au-
thority of the appropriate Federal banking
agencies under this subsection, the Securities
and Exchange Commission shall have the au-
thority to enforce the provisions of this sub-
section against a securities affiliate to the ex-
tent that those provisions govern the conduct or
activities of the securities affiliate as if they
were provisions of the Securities Exchange Act
of 1934.
‘‘(D) EXAMINATION
REPORTS.—The ap-
propriate Federal banking agencies shall, to the
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extent practicable, use the reports of examina-
tion of any broker, dealer, investment adviser,
or investment company made by or on behalf of
the Securities and Exchange Commission and
reports made by or on behalf of a registered se-
curities association or national securities ex-
change, and shall defer to such examinations
for compliance with the federal securities laws.
‘‘(E) INTERPRETATIONS OF THE FEDERAL
SECURITIES
LAWS.—The appropriate Federal
banking agencies shall defer to the Securities
and Exchange Commission regarding all inter-
pretations and enforcement of the Federal secu-
rities laws relating to the application of the
Federal securities laws to the activities and con-
duct of brokers, dealers, investment advisers,
and investment companies.
‘‘(F) NOTICE OF CERTAIN ACTIONS.—
‘‘(i) 
SECURITIES
AND
EXCHANGE
COMMISSION.—The Securities and Ex-
change Commission shall give notice to the
appropriate Federal banking agency upon
the entry of an order of investigation of, or
the commencement of any disciplinary or
law enforcement proceedings by the Com-
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mission and a copy of any order entered by
the Commission against—
‘‘(I) any broker, dealer, or invest-
ment adviser that—
‘‘(aa) is registered with the
Securities and Exchange Com-
mission; and
‘‘(bb) is affiliated with or is
a separately identifiable depart-
ment or division of an insured
depository institution;
‘‘(II) any investment company
registered with the Securities and Ex-
change Commission that is an affiliate
of or is advised by an investment ad-
viser affiliated with an insured deposi-
tory institution or by a separately
identifiable department or division of
an insured depository institution that
is a registered investment adviser; or
‘‘(III) any financial services hold-
ing company, insured depository insti-
tution, or subsidiary of such company
or institution, if the proposed action
relates to subtitles A, B, or C of title
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I of the Financial Services Competi-
tiveness Act of 1995.
‘‘(ii) APPROPRIATE
FEDERAL
BANK-
ING
AGENCIES.—Upon the entry of an
order of investigation of, or the commence-
ment of any disciplinary or law enforce-
ment proceedings to enforce the provisions
of subtitle A of title I of the Financial
Services Competitiveness Act of 1995 by
an appropriate Federal banking agency
against any broker, dealer, investment ad-
viser, or investment company that is reg-
istered under the Federal securities laws
and is affiliated with an insured depository
institution, the appropriate Federal bank-
ing agency shall give notice to the Securi-
ties and Exchange Commission of the pro-
posed action.
‘‘(iii) EXTENSION.—The notice re-
quired under clause (i) or (ii) may be pro-
vided promptly after action by the Securi-
ties and Exchange Commission or the ap-
propriate Federal banking agency, if—
‘‘(I) the Commission determines
that the protection of investors re-
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quires immediate action by the Com-
mission and prior notice under clause
(i) is not practical under the cir-
cumstances; or
‘‘(II) the appropriate Federal
banking agency determines that con-
cerns for the safety and soundness of
an insured depository institution or its
affiliate require immediate action by
the agency and prior notice under
clause (ii) is not practical under the
circumstances.
‘‘(G) COORDINATED
ENFORCEMENT
AC-
TIONS.—The Securities and Exchange Commis-
sion and the appropriate Federal banking agen-
cies shall, to the extent practicable, coordinate
supervisory actions based on applicable law
where the actions are based on the same or re-
lated events or practices.
‘‘(H) INVESTMENT
COMPANIES
NOT
AF-
FILIATED WITH AN INSURED DEPOSITORY IN-
STITUTION.—The appropriate Federal banking
agency shall not have authority under this title
or any other provision of law to inspect or ex-
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amine any investment company registered
under the Federal securities laws that is not—
‘‘(i) affiliated with an insured deposi-
tory institution; or
‘‘(ii) advised by an investment adviser
affiliated with an insured depository insti-
tution or by a separately identifiable de-
partment or division of an insured deposi-
tory institution that is a registered invest-
ment adviser.
‘‘(I) DEFINITION.—For purposes of this
paragraph, the term ‘Federal securities laws’
shall mean the provisions of Federal law gov-
erning securities activities that are within the
jurisdiction of the Securities and Exchange
Commission as set forth in the Securities Act of
1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Invest-
ment Advisers Act of 1940, and the Trust In-
denture Act of 1939.
‘‘(g) ACTIVITIES NOT PERMISSIBLE FOR DEPOSI-
TORY INSTITUTIONS OR SECURITIES AFFILIATES.—
‘‘(1) A financial services holding company that
acquires control of a securities affiliate shall not, be-
ginning 1 year after the date of that acquisition,
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permit any depository institution (as defined in sec-
tion 3 of the Federal Deposit Insurance Act) of
which it has control or any subsidiary of that insti-
tution—
‘‘(A) to engage, directly or indirectly, in
the United States—
‘‘(i) in underwriting securities backed
by or representing interests in notes,
drafts, acceptances, loans, leases, receiv-
ables, other obligations, or pools of any
such obligations, originated or purchased
by the institution or its affiliates;
‘‘(ii) in underwriting or dealing in any
other securities, except securities expressly
specified by section 5136 of the Revised
Statutes as permissible for a national bank
to underwrite or deal in; or
‘‘(iii) in effecting sales as part of a
primary offering to an accredited investor
(as defined in section 2 of the Securities
Act of 1933) of securities of an issuer, not
involving a public offering, pursuant to
section 3(b), 4(2), or 4(6) of the Securities
Act of 1933 and the rules and regulations
issued thereunder; or
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‘‘(B) to make an equity investment in any
securities affiliate.
‘‘(2) For purposes of this subsection, the term
‘depository institution’ shall include any state branch
or agency of a foreign bank, as those terms are de-
fined in section 1(b) of the International Banking
Act of 1978.
‘‘(3) The limitations in paragraph (1)(A) shall
not apply to activities conducted by a subsidiary held
pursuant to section 25 or 25A of the Federal Re-
serve Act of section 4(c)(13) of this Act.
‘‘(4) Nothing in this section shall permit a secu-
rities affiliate to accept deposits in contravention of
section 21 of the Banking Act of 1933 (12 U.S.C.
378(a)).
‘‘(h) APPROVAL OF SECURITIES ACTIVITIES UNDER
SECTION 4(c)(8) RESTRICTED.—The Board shall deny
any notice or application by a financial services holding
company under authority of section 4(c)(8) to engage in,
or acquire the shares of a company engaged in, underwrit-
ing or dealing in securities in the United States, except
securities expressly specified by section 5136 of the Re-
vised Statutes as permissible for a national bank to under-
write or deal in.
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‘‘(i) BANKERS’ BANKS.—For purposes of this sec-
tion, each shareholder of or participant in a company that
controls a depository institution described in section
5169(b)(1) of the Revised Statutes or in a similar statute
of any State, and each subsidiary of that company. This
subsection shall not apply to a shareholder or participant
in that company (or subsidiary of that shareholder or par-
ticipant) if the shareholder or participant and its affiliates
do not, in the aggregate, control more than 5 percent of
any class of voting shares of that company.
‘‘(j) SHARES ACQUIRED IN CONNECTION WITH UN-
DERWRITING AND INVESTMENT BANKING ACTIVITIES.—
‘‘(1) IN
GENERAL.—Notwithstanding section
4(a), a financial services holding company may di-
rectly or indirectly own or control shares of any
company engaged in activities not authorized pursu-
ant to section 4 of this Act if—
‘‘(A) the shares are acquired and held by
a securities affiliate as part of a bona fide un-
derwriting or investment banking activity and
such shares are held only for such period of
time as will permit the sale thereof on a reason-
able basis consistent with the nature of such ac-
tivity; and
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‘‘(B) during the period such shares are
held, the financial services holding company
does not directly or indirectly participate in the
day to day management or operation of the
company.
‘‘(2) BOARD RULES.—The Board may establish
rules governing the acquisition and retention of
shares under this subsection, including limitations
governing the circumstances and time period such
shares may be held, in order to assure compliance
with the purposes of this Act, including the protec-
tion of insured depository institutions and the sepa-
ration of banking and commerce.
‘‘(k) DEFINITIONS.—For purposes of this section:
‘‘(1) CAPITAL STOCK AND SURPLUS.—The term
‘capital stock and surplus’ has the same meaning as
in section 23A of the Federal Reserve Act.
‘‘(2) COVERED TRANSACTION.—The term ‘cov-
ered transaction’ has the same meaning as in section
23A of the Federal Reserve Act.
‘‘(3) SECURITY.—
‘‘(A) IN
GENERAL.—The term ‘security’
has the meaning given to that term in section
3(a)(10) of the Securities Exchange Act of
1934.
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‘‘(B) EXCEPTIONS.—For purposes of this
section, other than subsection (a), the term ‘se-
curity’ does not include any of the following:
‘‘(i) A contract of insurance.
‘‘(ii) A deposit account, savings ac-
count, certificate of deposit, or other de-
posit instrument issued by a depository in-
stitution.
‘‘(iii) A share account issued by a sav-
ings association if the account is insured
by the Federal Deposit Insurance Corpora-
tion.
‘‘(iv) A banker’s acceptance.
‘‘(v) A letter of credit issued by a de-
pository institution.
‘‘(vi) A debit account at a depository
institution arising from a credit card or
similar arrangement.
‘‘(vii) A traditional loan or loan par-
ticipation (as determined by the Board).
‘‘(C) BOARD’S
AUTHORITY
TO
EXEMPT
TRADITIONAL BANKING PRODUCTS.—The Board
may, after consultation and consideration of the
views of the Securities and Exchange Commis-
sion, by regulation exempt from the definition
HR 1062 IH
of ‘security’ a banking product that national
banks have traditionally and customarily origi-
nated or handled (such as mortgage notes) if
the exemption is consistent with the purposes of
this section.
‘‘(D) DEFINITION
FOR
LIMITED
PUR-
POSE.—The fact that a particular instrument is
excluded pursuant to subparagraphs (B) or (C)
from the definition of ‘security’ for purposes of
this section shall not be construed as finding or
implying that such instrument is or is not a ‘se-
curity’ for purposes of section 3(a)(10) of the
Securities Exchange Act of 1934.’’.
(b) TRANSITION RULE FOR SECURITIES AFFILIATES
APPROVED UNDER SECTION 4(c)(8).—
(1) IN GENERAL.—Effective 18 months after
the date of enactment of this Act, no financial serv-
ices holding company may engage in, or retain the
shares of any company engaged in, underwriting or
dealing in securities based on the approval of an ap-
plication under section 4(c)(8) of the Bank Holding
Company Act of 1956—
(A) unless the financial services holding
company has obtained the Board’s approval to