I
103D CONGRESS
1ST SESSION
H. R. 458
To permit national banks, State member banks, and bank holding companies
to establish subsidiaries which underwrite shares of and sponsor invest-
ment companies, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 6, 1993
Mr. HOAGLAND introduced the following bill; which was referred to the
Committee on Banking, Finance and Urban Affairs
A BILL
To permit national banks, State member banks, and bank
holding companies to establish subsidiaries which under-
write shares of and sponsor investment companies, and
for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Financial Services Act
of 1993’’.
SEC. 2. AUTHORIZATION FOR A SUBSIDIARY OF A NA-
TIONAL BANK TO UNDERWRITE SHARES OF
AND SPONSOR INVESTMENT COMPANIES.
Section 5136 of the Revised Statutes of the United
States (12 U.S.C. 24) is amended by adding at the end
the following new paragraph:
‘‘(11) MUTUAL FUNDS.—
‘‘(A) IN
GENERAL.—Notwithstanding the
restrictions and limitations in the paragraph
designated ‘Seventh’, to engage in the business
of dealing in, underwriting, and distributing the
shares of any investment company (as defined
in section 3 of the Investment Company Act of
1940) and to organize, sponsor, manage, or
control such an investment company if such ac-
tivities are conducted through a nonbank sub-
sidiary of the bank.
‘‘(B) COORDINATION WITH OTHER PROVI-
SIONS.—The activities authorized by this para-
graph are in addition to any other activity in
which a national bank may engage directly pur-
suant to another provision of law, or as other-
wise authorized by the Comptroller of the Cur-
rency, and this paragraph shall not be con-
strued as prohibiting a national bank from en-
gaging in such other activity directly.
‘‘(C) SUBSIDIARY
DEFINED.—For pur-
poses of this paragraph, the term ‘subsidiary’
means a corporation more than 25 percent of
the voting stock of which is owned by a national
bank. Such a corporation may be a subsidiary
of more than 1 national bank.’’.
SEC. 3. AUTHORIZATION FOR A SUBSIDIARY OF A STATE
MEMBER BANK TO UNDERWRITE SHARES OF
AND SPONSOR INVESTMENT COMPANIES.
The 20th undesignated paragraph of section 9 of the
Federal Reserve Act (12 U.S.C. 335) is amended by in-
serting before the period at the end the following: ‘‘, and
to the same exception to such limitations and conditions
as is applicable to national banks under paragraph (11)
of such section’’.
SEC. 4. DISCLOSURE REQUIREMENTS APPLICABLE TO SUB-
SIDIARIES OF NATIONAL AND STATE MEM-
BER BANKS.
The Federal Reserve Act is amended by inserting
after section 9A of the Federal Reserve Act (12 U.S.C.
339) the following new section:
‘‘SEC. 9B. DISCLOSURE REQUIREMENTS.
‘‘(a) IN GENERAL.—If a nonbank subsidiary of a na-
tional bank or State member bank engages in activities
pursuant to section 5136(11) of the Revised Statutes of
the United States or the 20th undesignated paragraph of
section 9 of this Act, the subsidiary shall—
‘‘(1) provide a 1-time written disclosure to each
customer that—
‘‘(A) the subsidiary is not an insured de-
pository institution;
‘‘(B) the subsidiary is a separate corporate
entity from any insured depository institution
which is an affiliate of the subsidiary; and
‘‘(C) any product sold, offered, or rec-
ommended by the subsidiary is not insured by
the Federal Deposit Insurance Corporation, is
not guaranteed by an insured depository insti-
tution, and is not otherwise an obligation of an
insured depository institution; and
‘‘(2) obtain a 1-time written acknowledgement
from each customer that the disclosures described in
paragraph (1) have been received.
‘‘(b) REGULATION OF METHOD OF DISCLOSURES.—
Any disclosures under subsection (a) shall be made in ac-
cordance with such regulations as may be prescribed—
‘‘(1) by the Comptroller of the Currency, in the
case of a subsidiary of a national bank; or
‘‘(2) by the Board, in the case of a subsidiary
of a State member bank.
‘‘(c) EXCEPTIONS
AND
ADDITIONAL
INFORMA-
TION.—The Comptroller of the Currency, in the case of
a subsidiary of a national bank, and the Board, in the
case of a subsidiary of a State member bank, may—
‘‘(1) require additional information to be dis-
closed under subsection (a) by the subsidiary; and
‘‘(2) grant any exception to the disclosure re-
quirement under subsection (a) which is consistent
with the purposes of such subsection.’’.
SEC. 5. AUTHORIZATION FOR A MEMBER BANK TO BE AF-
FILIATED WITH A COMPANY WHICH UNDER-
WRITES SHARES OF AND SPONSORS INVEST-
MENT COMPANIES.
The 1st sentence of section 20 of the Banking Act
of 1933 (12 U.S.C. 377) is amended by striking ‘‘securi-
ties: Provided, That nothing in this paragraph’’ and in-
serting ‘‘, except to the extent such affiliate is engaged
in activities in accordance with section 5136(11) of the
Revised Statutes of the United States, the 20th undesig-
nated paragraph of section 9 of the Federal Reserve Act,
or section 4(c)(15) of the Bank Holding Company Act of
1956. Nothing in this paragraph’’.
SEC. 6. AUTHORIZATION FOR A MEMBER BANK AND AN AF-
FILIATE ENGAGED IN INVESTMENT COMPANY
ACTIVITIES TO HAVE MANAGEMENT INTER-
LOCKS.
Section 32 of the Banking Act of 1933 (12 U.S.C.
78) is amended—
(1) by inserting ‘‘(a) GENERAL PROHIBITION
AND EXCEPTION.—’’ before ‘‘No officer,’’; and
(2) by adding at the end the following new sub-
section:
‘‘(b) EXCEPTION FOR AFFILIATES ENGAGED IN IN-
VESTMENT COMPANY ACTIVITIES.—Subsection (a) shall
not apply so as to prohibit an officer, director, or employee
of a nonbank subsidiary of a national bank, State member
bank, or bank holding company which is engaged in activi-
ties in accordance with section 5136(11) of the Revised
Statutes of the United States, the 20th undesignated
paragraph of section 9 of the Federal Reserve Act, or sec-
tion 4(c)(15) of the Bank Holding Company Act of 1956
from serving at the same time as an officer, director, or
employee of such bank, the bank holding company, a mem-
ber bank which is an affiliate of such bank, or an invest-
ment company that is organized, sponsored, managed, or
controlled by a subsidiary of such bank or holding com-
pany.’’.
SEC. 7. AUTHORIZATION FOR A BANK HOLDING COMPANY
TO ESTABLISH A COMPANY WHICH UNDER-
WRITES SHARES OF AND SPONSORS INVEST-
MENT COMPANIES.
(a) IN GENERAL.—Section 4(c) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843(c)) is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(13);
(2) by striking the period at the end of para-
graph (14)(H)(ii) and inserting ‘‘; or’’; and
(3) by inserting after paragraph (14)(H)(ii) the
following new paragraph:
‘‘(15) shares of any company engaged in deal-
ing in, underwriting, or distributing the shares of
any investment company (as defined in section 3 of
the Investment Company Act of 1940), or organiz-
ing, sponsoring, managing, or controlling such in-
vestment company.’’.
(b) DISCLOSURE REQUIREMENTS.—Section 4 of the
Bank Holding Company Act of 1956 (12 U.S.C. 1843)
is amended by adding at the end the following new sub-
section:
‘‘(j) DISCLOSURE REQUIREMENTS FOR SUBSECTION
(c)(15) ACTIVITIES.—
‘‘(1) IN GENERAL.—Any bank holding company
which controls a company described in subsection
(c)(15) shall require such company to—
‘‘(A) provide a 1-time written disclosure to
each customer that—
‘‘(i) the company is not an insured de-
pository institution;
‘‘(ii) the company is a separate cor-
porate entity from any insured depository
institution which is an affiliate of the com-
pany; and
‘‘(iii) any product sold, offered, or rec-
ommended by the company is not insured
by the Federal Deposit Insurance Corpora-
tion, is not guaranteed by an insured de-
pository institution, and is not otherwise
an obligation of an insured depository in-
stitution; and
‘‘(B) obtain a 1-time written acknowledge-
ment from each customer that the disclosures
described in subparagraph (A) have been re-
ceived.
‘‘(2) REGULATION
OF
METHOD
OF
DISCLO-
SURES.—Any disclosures under paragraph (1) shall
be made in accordance with such regulations as the
Board may prescribe.
‘‘(3) EXCEPTIONS AND ADDITIONAL INFORMA-
TION.—The Board may—
‘‘(A) require additional information to be
disclosed by the company under paragraph (1);
and
‘‘(B) grant any exception to the disclosure
requirement under paragraph (1) which is con-
sistent with the purposes of such subsection.’’.
Æ