I
104TH CONGRESS
1ST SESSION
H. R. 18
To enhance competition in the financial services industry by providing a
prudential framework for the affiliation of banks and securities firms.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 4, 1995
Mr. LEACH 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 juris-
diction of the committee concerned
A BILL
To enhance competition in the financial services industry
by providing a prudential framework for the affiliation
of banks and securities firms.
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
Competitiveness Act of 1995’’.
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TITLE I—BANK SECURITIES ACTIVITIES
AND AFFILIATIONS
Subtitle A—Securities Activities
SEC. 
101. 
ANTI-AFFILIATION 
PROVISION 
OF 
GLASS-
STEAGALL ACT REPEALED.
(a) SECTION 20 REPEALED.—Section 20 (12 U.S.C.
377) of the Banking Act of 1933 is repealed.
(b) CONFORMING AMENDMENT TO SECTION 32.—
Section 32 (12 U.S.C. 78) of the Banking Act of 1933
is amended by adding at the end the following sentence:
‘‘This section does not prohibit an officer, director, or em-
ployee of a securities affiliate (as defined in section 2 of
the Bank Holding Company Act of 1956) from serving
at the same time as an officer, director, or employee of
a member bank affiliated with that securities affiliate
under section 10 of the Bank Holding Company Act of
1956.’’.
SEC. 102. BANK HOLDING COMPANIES AUTHORIZED TO
HAVE SECURITIES AFFILIATES.
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) and inserting ‘‘; or’’; and
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‘‘(i) the Board permits the bank hold-
ing company to engage in that activity or
acquire those shares through the securities
affiliate; or
‘‘(ii) that provision permits the bank
holding company to engage in that activity
or acquire those shares without the
Board’s approval.
‘‘(b) ACQUIRING INTEREST IN SECURITIES AFFILI-
ATE.—
‘‘(1) NOTICE REQUIRED.—A bank holding com-
pany shall not, without complying with and receiving
approval pursuant to the notice procedure in section
4(j), directly or indirectly acquire or retain more
than 5 percent of the voting shares of, or all or sub-
stantially all of the assets of, a securities affiliate (or
a company that would be a securities affiliate if the
Board permitted the bank holding company to ac-
quire that company).
‘‘(2) CRITERIA
FOR
APPROVAL.—The Board
shall disapprove a notice required under paragraph
(1) unless the Board determines that all of the fol-
lowing are satisfied:
‘‘(A) CAPITAL.—
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‘‘(i) INSURED
DEPOSITORY
INSTITU-
TIONS.—
‘‘(I) The lead insured depository
institution of the bank holding com-
pany is well capitalized;
‘‘(II) Well capitalized insured de-
pository institutions control at least
80 percent of the total assets of in-
sured 
depository 
institutions 
con-
trolled by the bank holding company;
and
‘‘(III) All insured depository in-
stitutions controlled by the bank hold-
ing company are well capitalized or
adequately capitalized.
‘‘(ii) BANK HOLDING COMPANY.—The
bank holding company is (and immediately
after the acquisition would continue to be)
adequately capitalized.
‘‘(iii) FOREIGN
BANKS
AND
COMPA-
NIES.—The Board shall establish and
apply comparable capital standards for the
ownership or control of a securities affili-
ate in the United States by a foreign bank
(as defined in section 1(b) of the Inter-
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national Banking Act of 1978), giving due
regard to the principle of national treat-
ment and equality of competitive oppor-
tunity in the United States.
‘‘(B) MANAGERIAL RESOURCES.—
‘‘(i) IN GENERAL.—The bank holding
company and each of its subsidiary insured
depository institutions—
‘‘(I) are well managed; and
‘‘(II) were well managed during
the preceding 12-month period (but
for purposes of this subparagraph the
Board may disregard any insured de-
pository institution acquired by the
bank holding company during that
period).
‘‘(ii) SECURITIES
ACTIVITIES.—The
bank holding company has the managerial
resources to conduct the proposed securi-
ties activities safely and soundly.
‘‘(C) INTERNAL
CONTROLS.—The bank
holding company has established adequate poli-
cies and procedures to manage financial and
operational risks and to provide reasonable as-
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surance of compliance with this section and
other applicable laws.
‘‘(D) NO DETRIMENTAL EFFECT ON BANK
HOLDING
COMPANY
OR
ITS
SUBSIDIARY
IN-
SURED
DEPOSITORY
INSTITUTIONS.—The ac-
quisition would not adversely affect the safety
and soundness of—
‘‘(i) the bank holding company; or
‘‘(ii) any insured depository institu-
tion subsidiary of the bank holding com-
pany.
‘‘(E) CONCENTRATION OF RESOURCES.—
The acquisition would not result in an undue
concentration of resources in the commercial
banking and investment banking business.
‘‘(3) EXPEDITED NOTICE PROCEDURE FOR AC-
QUISITION
OF
ADDITIONAL
SECURITIES
AFFILI-
ATES.—
‘‘(A) ADDITIONAL
SECURITIES
AFFILI-
ATES.—A bank holding company may, without
providing the notice required under subsection
(b), directly or indirectly acquire the shares or
substantially all of the assets of any company
that is engaged predominantly in activities de-
scribed in subsection (a) (1) and (2), if—
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‘‘(i) the bank holding company pre-
viously received the Board’s approval
under subsection (b) to control a securities
affiliate and continues to control the secu-
rities affiliate pursuant to that approval;
‘‘(ii) the bank holding company is
adequately capitalized and would continue
to be adequately capitalized following the
acquisition; and
‘‘(iii) all insured depository institu-
tions controlled by the bank holding com-
pany are well capitalized and would con-
tinue to be well capitalized following the
acquisition.
‘‘(B) APPROVAL REQUIRED.—
‘‘(i) ABBREVIATED
NOTICE
PROCE-
DURE.—A bank holding company may not
acquire shares or assets under subpara-
graph (A) unless the company has pro-
vided the Board at least 30-days written
notice prior to the transaction and, during
that period, the Board has not disapproved
the transaction.
‘‘(ii) LIMITED
EXTENSION
OF
PE-
RIOD.—The Board may extend the dis-
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approval period provided in clause (i) for
up to an additional 15 days.
‘‘(iii) STANDARDS
APPLIED
BY
THE
BOARD.—In reviewing a notice under this
paragraph, the Board shall consider wheth-
er the activities of the company to be ac-
quired are authorized under section 10 and
shall apply the standards provided in sec-
tion 4(j)(2).
‘‘(c) ADDITIONAL INVESTMENT IN SECURITIES AF-
FILIATE.—
‘‘(1) PRIOR NOTICE REQUIRED.—A bank hold-
ing company that has acquired control of a securi-
ties affiliate under this section shall not, directly or
indirectly, make any additional investment in the se-
curities affiliate that is considered capital for pur-
poses of any capital requirement imposed on the se-
curities affiliate under the Securities Exchange Act
of 1934 (other than an extension of credit under a
revolving credit agreement approved by the Board),
unless the bank holding company gives the Board
prior written notice of the proposed investment
and—
‘‘(A) the Board issues a written statement
of its intent not to disapprove the notice; or
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‘‘(B) the Board does not disapprove the
notice within 30 days after the notice is filed.
‘‘(2) NO PRIOR NOTICE REQUIRED FOR CER-
TAIN BANK HOLDING COMPANIES.—A bank holding
company is not required to provide prior notice
under paragraph (1) if after making any investment
described in paragraph (1)—
‘‘(A) the bank holding company would ade-
quately capitalized and each of the bank hold-
ing company’s subsidiary insured depository in-
stitutions would be well capitalized; and
‘‘(B) the bank holding company and each
of its subsidiary insured depository institutions
are well managed (but for purposes of this
clause the Board may disregard any insured de-
pository institution acquired by the bank hold-
ing company during the previous 12-month pe-
riod). A bank holding company that makes an
investment pursuant to this paragraph shall
provide written notice to the Board of the addi-
tional investment within 10 days after making
the investment.
‘‘(3) CRITERIA FOR DISAPPROVING NOTICE.—
The Board may disapprove a notice filed under
paragraph (1) if any insured depository institution
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affiliate of the securities affiliate is undercapitalized,
or if the Board determines that the bank holding
company would be undercapitalized after making the
investment or that the investment would otherwise
be unsafe or unsound.
‘‘(4) EMERGENCY APPROVAL.—Notwithstanding
any provision of this subsection, in the event of ad-
verse market conditions, or concerns regarding the
financial or operational condition of the securities
affiliate, the Board may approve any additional in-
vestment in the securities affiliate on an emergency
basis.
‘‘(d) PROVISIONS APPLICABLE IF AFFILIATED IN-
SURED DEPOSITORY INSTITUTION CEASES TO BE WELL
CAPITALIZED.—
‘‘(1) CERTAIN
SECURITIES
ACTIVITIES
RE-
STRICTED UNLESS AFFILIATED INSTITUTIONS ARE
WELL CAPITALIZED.—
‘‘(A) 
APPLICABILITY.—This 
paragraph
shall apply to a securities affiliate if—
‘‘(i) the lead insured depository insti-
tution of the bank holding company is not
well capitalized, or
‘‘(ii) well capitalized insured deposi-
tory institutions do not control at least 80
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percent of the assets of insured depository
institutions affiliated with the securities
affiliate.
‘‘(B) IN GENERAL.—Except as provided in
subparagraph (C), the securities affiliate shall
not, beginning 180 days after subparagraph (A)
applies, agree to underwrite or deal in any secu-
rities other than—
‘‘(i) securities expressly specified by
section 5136 of the Revised Statutes as
permissible for a national bank to under-
write or deal in;
‘‘(ii) securities backed by or represent-
ing interests in notes, drafts, acceptances,
loans, leases, receivables, other obligations,
or pools of any such obligations; or
‘‘(iii) securities issued by an open-end
investment company registered under the
Investment Company Act of 1940.
‘‘(C) EXCEPTION.—The Board may permit
the securities affiliate to underwrite or deal in
securities not described in clauses (i) through
(iii) of subparagraph (B) for a period of 1 year
from the date on which subparagraph (A) ap-
plies, if—
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‘‘(i) the bank holding company sub-
mits a capital restoration plan to the
Board specifying the steps the bank hold-
ing company will take to meet the require-
ments of section 10(b)(2)(A), and contain-
ing such other information as the Board
may require; and
‘‘(ii) the Board approves the plan.
‘‘(D) EXTENSION OF PERIOD.—Upon ap-
plication by the bank holding company, the
Board may extend, for not more than 1 year at
a time, the period provided in subparagraph
(C), but no such extension shall in the aggre-
gate exceed 2 years.
‘‘(2) DIVESTITURE.—
‘‘(A) IN
GENERAL.—The bank holding
company shall divest itself of the securities af-
filiate if any of the bank holding company’s
subsidiary insured depository institutions has
been undercapitalized for more than 24 months.
‘‘(B) EXTENDING TIME.—The Board may
provide additional time for divestiture not ex-
ceeding 12 months if the appropriate Federal
banking 
agency 
has 
approved 
the
undercapitalized institution’s capital restoration
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plan under section 38(e) of the Federal Deposit
Insurance Act, and the Board determines
that—
‘‘(i) the bank holding company has at-
tempted in good faith to sell the securities
affiliate at a realistic price; and
‘‘(ii) the securities affiliate poses no
significant risk to any affiliated insured de-
pository institution.
‘‘(e) SECURITIES AFFILIATE EXCLUDED IN DETER-
MINING WHETHER BANK HOLDING COMPANY IS ADE-
QUATELY CAPITALIZED.—
‘‘(1) IN GENERAL.—In determining whether a
bank holding company is adequately capitalized—
‘‘(A) the bank holding company’s capital
and total assets shall each be reduced by—
‘‘(i) an amount equal to the amount
of the bank holding company’s equity in-
vestment in any securities affiliate; and
‘‘(ii) an amount equal to the amount
of any extensions of credit by the bank
holding company to any securities affiliate
that are considered capital for purposes of
any capital requirement imposed on the se-
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curities affiliate under section 15(c)(3) of
the Securities Exchange Act of 1934; and
‘‘(B) the securities affiliate’s assets and li-
abilities shall not be consolidated with those of
the bank holding company.
‘‘(2) EXCEPTION FOR NONSECURITIES ACTIVI-
TIES.—Paragraph (1) does not apply to the extent
that the Board determines by regulation or order
that an item described in that paragraph relates to
activities that are not described in paragraph (1) or
(2) of subsection (a).
‘‘(f) SAFEGUARDS RELATING TO SECURITIES AFFILI-
ATES.—
‘‘(1) EXTENSION OF CREDIT AND ASSET PUR-
CHASES RESTRICTED.—
‘‘(A) IN GENERAL.—No insured depository
institution affiliated with a securities affiliate
shall, directly or indirectly, do any of the follow-
ing:
‘‘(i) Extend credit in any manner to
the securities affiliate.
‘‘(ii) Issue a guarantee, acceptance, or
letter of credit, including an endorsement
or a standby letter of credit, for the benefit
of the securities affiliate.
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‘‘(iii) Purchase for its own account fi-
nancial assets of the securities affiliate, ex-
cept to the extent permitted by the Board
with respect to purchasing at the current
market value (based on reliable and regu-
larly available price quotations)—
‘‘(I) securities expressly specified
by section 5136 of the Revised Status
as permissible for a national bank to
underwrite or deal in; or
‘‘(II) securities that—
‘‘(aa) the securities affiliate
has been marking to market
daily; and
(bb) are rated investment
grade by at least 1 nationally
recognized statistical rating orga-
nization.
‘‘(B) EXCEPTION FOR CLEARING SECURI-
TIES.—Subparagraph (A)(i) does not prohibit
an extension of credit by a well capitalized in-
sured depository institution made to acquire or
sell securities if—
‘‘(i) the extension of credit is inciden-
tal to clearing transactions in those securi-
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ties through that insured depository insti-
tution;
‘‘(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-
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cent of the institution’s capital
stock and surplus; and
‘‘(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 addition security or other
assurance of performance, if any, as
the Board shall require to prevent
such transactions from posing any ap-
preciable 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
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‘‘(ii) the aggregate amount of covered
transactions between the institution and all
securities affiliates of the bank 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 surplus.
‘‘(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 there is substantial
participation by other lenders in the exten-
sion of credit, standby letter of credit,
asset 
purchase 
agreement, 
indemnity,
guarantee, insurance or other facility; and
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‘‘(ii) for securities expressly specified
by section 5136 of the Revised Status 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 bank holding com-
pany or subsidiary of a bank holding company
(other than a securities affiliate) shall know-
ingly 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 security is the subject of
a distribution in which a securities affiliate of
that bank holding company participates as an
underwriter or a member of a selling group.
For purposes of this subparagraph, a bank
holding company or subsidiary may rely on an
express 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)—
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‘‘(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
views of the Securities and Exchange Com-
mission, if:
‘‘(I) the bank holding company is
adequately capitalized,
‘‘(II) the bank holding 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
bank holding company and all insured
depository institutions controlled by
the bank 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
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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) RESTRICTION ON EXTENDING CREDIT TO
MAKE PAYMENTS ON SECURITIES.—
‘‘(A) IN GENERAL.—No insured depository
institution affiliated with a securities affiliate
shall, directly or indirectly, extend credit to an
issuer of securities underwritten by the securi-
ties affiliate for the purpose of paying the prin-
cipal of those securities or interest or dividends
on those securities. This subparagraph does not
apply to an extension of credit for a docu-
mented purpose (other than paying principal,
interest, or dividends) if the timing, maturity,
and other terms of the credit, taken as a whole,
are substantially different from those of the un-
derwritten securities.
‘‘(B) EXCEPTIONS.—The Board may make
exceptions to subparagraph (A) if the insured
depository institution is well capitalized, and—
‘‘(i) the securities are securities ex-
pressly specified by section 5136 of the Re-
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vised Statutes as permissible for a national
bank to underwrite or deal in; or
‘‘(ii) there is substantial participation
by other lenders in the extension of credit.
‘‘(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 BANK HOLD-
ING
COMPANIES.—Notwithstanding 
subpara-
graph (A), a director or senior executive officer
of a securities affiliate may serve at the same
time as a director or senior executive officer of
an affiliated insured depository institution if
that institution and all affiliated insured deposi-
tory institutions have, in the aggregate, total
assets of not more than $500,000,000. The dol-
lar limitation in the preceding sentence shall be
adjusted annually after December 31, 1995, by
the annual percentage increase in the Consumer
Price Index for Urban Wage Earners and Cleri-
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cal 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 bank holding compa-
nies, insured depository institutions,
and securities affiliates involved, any
burdens that may be imposed by sub-
paragraph (A), the safety and sound-
ness of the insured depository institu-
tions and securities affiliates, and
other appropriate factors, including
unfair competition in securities activi-
ties or the improper exchange of
nonpublic customer information; and
‘‘(II) shall not permit—
‘‘(aa) more than half of the
insured depository institution’s
directors to be directors or senior
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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
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 affiliated 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-
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‘‘(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
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
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purchased by an affiliated insured depository institu-
tion or subsidiary of such an institution—
‘‘(A) unless those securities—
‘‘(i) are rated by at least one unaffili-
ated, nationally recognized statistical rat-
ing organization;
‘‘(ii) are issued or guaranteed by the
Federal Home Loan Mortgage Corpora-
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 bank holding company and no subsidiary
of a bank holding company may enter into any
agreement, understanding, or other arrangement
under which—
‘‘(A) one bank holding company (or sub-
sidiary of that bank holding company) agrees to
engage in a transaction with, or on behalf of,
another bank holding company (or subsidiary of
that bank holding company), in exchange for
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‘‘(B) the agreement of the second bank
holding company referred to in subparagraph
(A) (or a subsidiary of that bank holding com-
pany) to engage in any transaction with, or on
behalf of, the first bank holding company re-
ferred to in that subparagraph (or any subsidi-
ary of that bank 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 bank holding compa-
nies.
‘‘(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—
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‘‘(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-
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 bank holding companies,
prevention of the subsidization of securities af-
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filiates by insured depository institutions, avoid-
ance of conflicts of interest or other abuses, and
application of the principle of national treat-
ment and equality of competitive opportunity
between securities affiliates owned or controlled
by domestic bank holding companies and securi-
ties 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
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of insured depository institutions reg-
istered as investment advisers; and
‘‘(II) such insured depository in-
stitutions and their affiliates;
‘‘(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
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information necessary to monitor compli-
ance under sections 3(a)(4)(C) and 3(a)(5)
of the Securities Exchange Act of 1934.
‘‘(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
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were provisions of the Securities Exchange Act
of 1934.
‘‘(D) EXAMINATION
REPORTS.—The ap-
propriate Federal banking agencies shall, to the
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
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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-
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
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‘‘(III) any bank holding com-
pany, insured depository institution,
or subsidiary of such company or in-
stitution, if the proposed action re-
lates to subtitles A, B, or C of title I
of the Financial Services Competitive-
ness 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-
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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-
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.
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‘‘(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-
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
1993, 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.
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‘‘(g) ACTIVITIES
NOT PERMISSIBLE
FOR DEPOSI-
TORY INSTITUTIONS OR SECURITIES AFFILIATES.—
‘‘(1) A bank holding company that acquires
control of a securities affiliate shall not, beginning
1 year after the date of that acquisition, permit any
depository institution (as defined in section 3 of the
Federal Deposit Insurance Act) of which it has con-
trol or any subsidiary of that institution—
‘‘(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 insured depository 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
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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
‘‘(B) to make an equity investment in any
securities affiliate.
‘‘(2) 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 or section 4(c)(13) of this Act.
‘‘(3) 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 bank holding company
under authority of section 4(c)(8) to engage in, or acquire
the shares of a company engaged in, underwriting or deal-
ing in securities in the United States, except securities ex-
pressly specified by section 5136 of the Revised Statutes
as permissible for a national bank to underwrite 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 such a shareholder
or participant, shall be treated as if it were a subsidiary
of that company. This subsection shall not apply to a
shareholder or participant in that company (or subsidiary
of that shareholder or participant) if the shareholder or
participant and its affiliates do not, in the aggregate, con-
trol 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 bank holding company may directly or indi-
rectly own or control shares of any company engaged
in activities not authorized pursuant 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-
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able basis consistent with the nature of such ac-
tivity; and
‘‘(B) during the period such shares are
held, the bank holding company does not di-
rectly 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 amount and percentage of shares that
may be held under this paragraph and the cir-
cumstances and time period such shares may be
held, in order to assure compliance with the pur-
poses of this Act, including the separation of bank-
ing and commerce.
‘‘(k) DEFINITIONS.—For purposes of this section—
‘‘(1) CAPITAL CATEGORIES.—
‘‘(A) 
INSURED
DEPOSITORY
INSTITU-
TIONS.—With respect to insured depository in-
stitutions, the terms ‘well capitalized’, ‘ade-
quately capitalized’, and ‘undercapitalized’ have
the meaning given to those terms in section
38(b) of the Federal Deposit Insurance Act.
‘‘(B) 
BANK
HOLDING
COMPANIES.—A
bank holding company is ‘adequately capital-
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ized’ if it meets the required minimum level for
each relevant capital measure established by the
Board 
for 
bank 
holding 
companies, 
and
‘undercapitalized’ if it fails to meet the required
minimum level for any such relevant capital
measure.
‘‘(2) CAPITAL STOCK AND SURPLUS.—The term
‘capital stock and surplus’ has the same meaning as
in section 23A of the Federal Reserve Act.
‘‘(3) COVERED TRANSACTION.—The term ‘cov-
ered transaction’ has the same meaning as in section
23A of the Federal Reserve Act.
‘‘(4) FOREIGN BANKS.—A branch or agency of
a foreign bank or a commercial lending company
controlled by a foreign bank (as in terms ‘agency’,
‘branch’, ‘commercial lending company’, and ‘foreign
bank’ are defined in section 1 of the International
Banking Act of 1978) shall be deemed to be an in-
sured depository institution.
‘‘(5) 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
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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 bank holding
company may engage in, or retain the shares of any
company engaged in, underwriting or dealing in se-
curities based on the approval of an application
under section 4(c)(8) of the Bank Holding Company
Act of 1956—
(A) unless the bank holding company has
obtained the Board’s approval to retain the
shares of that company under section 10; or
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(B) except underwriting or dealing in secu-
rities expressly specified by section 5136 of the
Revised Statutes as permissible for a national
bank to underwrite or deal in.
(2) EXTENDING TIME.—
(A) IN
GENERAL.—The Board may, for
good cause shown, extend the time provided
under paragraph (1) for not more than 18
months.
(B) PENDING NOTICES.—If a bank holding
company has filed a notice under section 10(b)
of the Bank Holding Company Act of 1956 not
later than 180 days after the date of enactment
of this Act, paragraph (1) shall not apply with
respect to the company engaged in such under-
writing or dealing until 180 days after the
Board has acted on the notice.
(c) CONFORMING AMENDMENTS.—
(1) DEFINITIONS.—Section 2 of the Bank
Holding Company Act of 1956 (12 U.S.C. 1841) is
amended by adding at the end the following new
subsections:
‘‘(n) SECURITIES AFFILIATE.—The term ‘securities
affiliate’ means any company—
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‘‘(1) that is (or is required to be) registered
under the Securities Exchange Act of 1934 as a
broker or dealer; and
‘‘(2) the acquisition or retention of the shares
or assets of which the Board has approved under
section 10.
‘‘(o) INSURED
DEPOSITORY
INSTITUTION.—The
term ‘insured depository institution’ has the meaning
given to that term in section 3 of the Federal Deposit In-
surance Act.
‘‘(p) LEAD INSURED DEPOSITORY INSTITUTION.—
The term ‘lead insured depository institution’ shall mean
the largest insured depository institution controlled by the
bank holding company, based on a comparison on the av-
erage total assets controlled by each insured depository in-
stitution during the previous 12-month period.
‘‘(q) APPROPRIATE FEDERAL BANKING AGENCY.—
The term ‘appropriate Federal banking agency’ has the
same meaning as in section 3(q) of the Federal Deposit
Insurance Act.’’.
(2) AMENDMENT REGARDING CONDITIONAL AP-
PROVAL OF APPLICATIONS.—Section 4(a)(2) of the
Bank Holding Company Act of 1956 (12 U.S.C.
1843(a)(2)) is amended by striking ‘‘paragraph (8)’’
and all that follows through ‘‘issued by the Board
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under such paragraph’’ and inserting ‘‘section 10,
subsection (l) or subsection (c)(8), subject to all the
conditions specified in those provisions or in any
order or regulation issued by the Board under those
provisions’’.
(3) AMENDMENT
TO
NOTICE
PROCEDURES.—
Section 4(j) of the Bank Holding Company Act of
1956 (12 U.S.C. 1843(j)) is amended—
(A) in paragraph (1)(A) by striking ‘‘sub-
section (c)(8) or (a)(2)’’ and inserting in its
place ‘‘subsection (c)(8), (c)(15), (l), or (a)(2)’’;
(B) in paragraph (1)(E) by striking ‘‘sub-
section (c)(8) or (a)(2)’’ and inserting in its
place ‘‘subsection (c)(8), (c)(15), (l), or (a)(2)’’;
(C) by redesignating paragraphs (2)(B)
and (2)(C) as paragraphs (2)(C) and (2)(D) re-
spectively, and inserting a new paragraph
(2)(B) as follows:
‘‘(B) CRITERIA FOR NOTICES INVOLVING
SECURITIES
AFFILIATES.—In considering any
notice that involves the acquisition of shares of
a securities affiliate pursuant to section
4(c)(15), the Board shall apply the criteria and
safeguards contained in this paragraph and in
section 10.’’.
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(d) AMENDMENT TO THE FEDERAL RESERVE ACT.—
Section 23B(b)(1)(B) of the Federal Reserve Act (12
U.S.C. 371c–1(b)(1)(B)) is amended by inserting ‘‘and for
30 days thereafter’’ after ‘‘during the existence of any un-
derwriting or selling syndicate’’.
(e) EXEMPTION FROM SECTION 305(b) OF THE FED-
ERAL POWER ACT.—Section 305(b) of the Federal Power
Act (16 U.S.C. 825d(b)) shall not apply to any person
now holding or proposing to hold the position of officer
or director of a public utility and officer or director of
a bank, trust company, banking association, or firm per-
mitted by section 10 of the Bank Holding Company Act
of 1956 (as amended by subsection (a)) or section 5136(b)
of the Revised Statutes (12 U.S.C. 24(b)) (as amended
by section 716) to underwrite or participate in the market-
ing of securities (including commercial paper) of a public
utility, if that bank, trust company, banking association,
or firm does not underwrite or participate in the market-
ing of securities of the public utility for which the person
serves or proposes to serve as an officer or director.
(f) RETENTION OF CERTAIN INVESTMENTS BY SECU-
RITIES COMPANIES AFFILIATING WITH INSURED DEPOSI-
TORY INSTITUTIONS.—Section 4 of the Bank Holding
Company Act (12 U.S.C. 1843) is amended by adding at
the end the following new subsection:
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‘‘(k) OWNERSHIP OF SHARES OF CERTAIN COMPA-
NIES BY SECURITIES COMPANIES THAT BECOME BANK
HOLDING COMPANIES.—
‘‘(1) FINANCIAL COMPANIES.—Notwithstanding
subsection (a), a bank holding company may retain
direct or indirect ownership or control of voting
shares of any company that engages solely in activi-
ties that the Board determines to be financial in na-
ture if—
‘‘(A) the bank holding company acquired
the shares of such company or of each company
to which it is a successor more than two years
prior to the date that such bank holding com-
pany becomes a bank holding company;
‘‘(B) the aggregate investment by the bank
holding company in shares ownership or control
of which the bank holding company would be
prohibited from retaining but for this para-
graph does not exceed 10 percent of the total
consolidated capital and surplus of the bank
holding company on the date that it becomes a
bank holding company or on the date of any ad-
ditional investment by the bank holding com-
pany in such shares; and
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‘‘(C) more than 50 percent of the business
of the bank holding company for each of the
two calendar years prior to the date it becomes
a bank holding company involved securities ac-
tivities described in sections 10(a) (1) and (2),
excluding from such calculation activities (other
than securities activities) in which bank holding
companies were permitted to engage prior to
the enactment of the Financial Services Com-
petitiveness Act of 1995.
‘‘(2) NONFINANCIAL COMPANIES.—
‘‘(A) IN GENERAL.—Notwithstanding sub-
section (a), a bank holding company that is de-
scribed in paragraph (1)(C) may, for a period
of 5 years from the date that the company be-
comes a bank holding company, retain direct or
indirect ownership or control of voting shares of
any company that the bank holding company
owns or controls on the date it becomes a bank
holding company.
‘‘(B) EXTENSION
OF
DIVESTITURE
PE-
RIOD.—The Board may extend the period de-
scribed in subparagraph (A) for an additional
period not to exceed 5 years if the Board deter-
mines that such extension is necessary to avert
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substantial loss to the bank holding company
and finds that the bank holding company has
made good faith efforts to divest such shares.
‘‘(C) NO
EXPANSION
OF
NONFINANCIAL
COMPANIES
PRIOR
TO
DIVESTITURE.—Unless
such acquisition or activity is permitted in ac-
cordance with section 4(c)—
‘‘(i) no bank holding company or com-
pany whose shares are owned or controlled
by a bank holding company pursuant to
this paragraph (2) may acquire any inter-
est in or assets of any company, and
‘‘(ii) no company whose shares are
owned or controlled by a bank holding
company pursuant to this paragraph (2)
may engage directly or indirectly in any
activity that the company did not conduct
on the day before the bank holding com-
pany registered as a bank holding com-
pany.
‘‘(3) RESTRICTIONS ON JOINT MARKETING.—
No insured depository institution (and no subsidiary
of such institution) shall—
‘‘(A) offer or market, directly or indirectly
through any arrangement, any product or serv-
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ice of any affiliate whose shares are owned or
controlled by the bank holding company pursu-
ant to this subsection or section 10(j), or
‘‘(B) permit any of its products or services
to be offered or marketed, directly or indirectly
through any arrangement, by or through any
affiliate whose shares are owned or controlled
by the bank holding company pursuant to this
subsection or section 10(j),
unless the product or service is permissible for bank
holding companies to provide under section 10 or
section 4(c)(8).’’.
(g) AMENDMENT TO THE RIGHT TO FINANCIAL PRI-
VACY ACT.—Section 1112(e) of the Right to Financial
Privacy Act (12 U.S.C. 3412(e)) is amended as follows—
(1) by deleting ‘‘this chapter’’ and inserting in
its place ‘‘law’’; and
(2) by adding ‘‘, examination reports’’ after ‘‘fi-
nancial records’’.
(h) EXCEPTION TO RESTRICTION ON ASSET GROWTH
OF NONBANK BANKS.—Section 4(f)(3)(B)(iv) of the Bank
Holding 
Company 
Act 
of 
1956 
(12 
U.S.C.
1843(f)(3)(B)(iv)) is amended by striking the period and
inserting the following: ‘‘unless—
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‘‘(I) the company has provided at
least 60 days prior written notice to the
Board and, during that period, the Board
has not disapproved the proposal after ap-
plying the standards provided in subsection
(j)(2);
‘‘(II) each insured depository institu-
tion controlled by the company is at all
times well-capitalized; and
‘‘(III) the company engages, directly
or indirectly, only in activities—
‘‘(aa) permitted pursuant to sub-
section 4(c)(8) or (15); or
‘‘(bb) determined by the Board to
be financial in nature and the com-
pany satisfies the provisions of sub-
section (k)(1) (B) and (C), or would
satisfy the provisions of subsection
(k)(1) (B) and (C) if the company
were a bank holding company.’’.
(i) CONFORMING AMENDMENT FOR CERTAIN HOLD-
ING COMPANIES.—Section 10(c) of the Home Owners’
Loan Act (12 U.S.C. 1467a(c)) is amended by striking
paragraphs (3), (5), and (6) and redesignating other para-
graphs accordingly.
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SEC. 104. SECURITIES COMPANY AFFILIATIONS OF FDIC-IN-
SURED BANKS.
Section 18 of the Federal Deposit Insurance Act (12
U.S.C. 1828) is amended by adding at the end the follow-
ing new subsections:
‘‘(s) 
SECURITIES
AFFILIATIONS
OF
INSURED
BANKS.—
‘‘(1) IN GENERAL.—A bank shall not be an af-
filiate of any company that, directly or indirectly,
acts as an underwriter or dealer of any security, ex-
cept—
‘‘(A) as provided in section 10 of the Bank
Holding Company Act of 1956; or
‘‘(B) a company that underwrites or deals
only in securities expressly specified by section
5136 of the Revised Statutes as permissible for
a national bank to underwrite or deal in.
‘‘(2) EXCEPTION.—This subsection does not
apply to an insured bank described in subparagraph
(D), (F), or (H) or section 2(c)(2) of the Bank
Holding Company Act of 1956 or to a company held
pursuant to section 25 or 25A of the Federal Re-
serve Act or section 4(c)(13) of the Bank Holding
Company Act.
‘‘(3) GRANDFATHER
PROVISION.—This sub-
section does not prohibit—
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‘‘(A) the continuation of an affiliation that
existed on January 1, 1995; or
‘‘(B) any new affiliation by an insured
bank that has an affiliation that would be pro-
hibited if the affiliation were not covered by
subparagraph (A).
‘‘(4) DEFINITIONS.—For purposes of this sub-
section:
‘‘(A) AFFILIATE.—The term ‘affiliate’ has
the meaning given to that term in section 2(k)
of the Bank Holding Company Act of 1956.
‘‘(B) COMPANY.—The term ‘company’ has
the meaning given to that term in section 2(b)
of the Bank Holding Company Act of 1956.
‘‘(C) BROKER.—The term ‘broker’ has the
meaning given to that term in section 3(a)(4)
of the Securities Exchange Act of 1934.
‘‘(D) DEALER.—The term ‘dealer’ has the
meaning given to that term in section 3(a)(5)
of the Securities Exchange Act of 1934.
‘‘(E) SECURITY.—
‘‘(i) IN
GENERAL.—The term ‘secu-
rity’ has the meaning given to that term in
section 3(a)(10) of the Securities Ex-
change Act of 1934.
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after consultation with and considering the
views of the Securities and Exchange Com-
mission, by regulation exempt from the
definition of ‘security’ a banking product
that national banks have traditionally and
customarily originated or handled (such as
mortgage notes) if the exemption is con-
sistent with the purposes of this sub-
section.
‘‘(iv) DEFINITION FOR LIMITED PUR-
POSE.—The fact that a particular instru-
ment is excluded pursuant to clauses (ii) or
(iii) from the definition of ‘security’ for
purposes of this subsection shall not be
construed as finding or implying that such
instrument is or is not a ‘security’ for pur-
poses of section 3(a)(10) of the Securities
Exchange Act of 1934.
‘‘(E) UNDERWRITER.—The term ‘under-
writer’ has the meaning given to that term in
section 2(11) of the Securities Act of 1933.
‘‘(t) BROKER/DEALER REGISTRATION.—An insured
bank may not use the United States mails or any means
or instrumentality of interstate commerce to act as a
broker or dealer without registration under the Securities
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Exchange Act of 1934, except to the extent permitted
under section 3(a)(4) or 3(a)(5), or unless otherwise ex-
empt pursuant to rules promulgated by the Securities and
Commission.’’.
SEC. 105. AUTHORITY TO TERMINATE GRANDFATHER
RIGHTS UNDER THE INTERNATIONAL BANK-
ING ACT OF 1978.
Section 8(c) of the International Banking Act of
1978 (12 U.S.C. 3106(c)) is amended by adding at the
end the following new paragraph:
‘‘(3) PARITY IN CONDUCT OF AUTHORIZED SE-
CURITIES ACTIVITIES.—
‘‘(A) IN GENERAL.—Notwithstanding any
provision of paragraph (1) or any other provi-
sion of law, any authority conferred under this
subsection on any foreign bank or company
with respect to an activity of an affiliate en-
gaged in securities activities shall terminate 18
months after the Board determines that such
activity is authorized for bank holding compa-
nies in the United States, except that—
‘‘(i) the foreign bank or company may
retain the shares of an affiliate engaged in
securities activities, if, prior to the expira-
tion of such 18 months period, the foreign
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bank or company has obtained the Board’s
approval under section 10 or section
4(c)(8) of the Bank Holding Company Act
to retain such shares, and
‘‘(ii) the Board, for good cause shown,
may extend the termination period for an
additional period not to exceed 18 months.
‘‘(B) EXTENSION
TO
OBTAIN
REQUIRED
APPROVAL.—If the foreign bank or company
has filed a notice under section 10(b) of the
Bank Holding Company Act not later than 180
days after the board has made a determination
under subparagraph (A), the effective date of
any termination of authority for that foreign
bank or company under subparagraph (A) shall
be 24 months after the Board has acted on the
notice.’’.
SEC. 106. EFFECT ON STATE LAWS PROHIBITING THE AF-
FILIATION OF BANKS AND SECURITIES COM-
PANIES.
Section 7 of the Bank Holding Company Act of 1956
(12 U.S.C. 1846) is amended by inserting before the final
period the following: ‘‘, except that no State may prohibit
or limit the affiliation of a bank or bank holding company
with a securities affiliate solely because the securities affil-
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iate is engaged in activities described in paragraph (1) or
(2) of section 10(a) of this Act.’’.
SEC. 107. MUNICIPAL SECURITIES
At the end of section 5136 of the Revised Statutes
(12 U.S.C. 24(Seventh)), add the following new sentences:
‘‘Notwithstanding any other provision of this para-
graph, a national banking association may deal in, under-
write, and purchase for such association’s own account
any obligation of, or obligation guaranteed as to principal
or interest by, a State or of any political subdivision there-
of, or any agency or instrumentality of a State or any po-
litical subdivision thereof, if the association—
‘‘(1) is well capitalized (as defined in section
38(b) of the Federal Deposit Insurance Act);
‘‘(2) engages in the business of banking;
‘‘(3) has not been affiliated with a securities af-
filiate under section 10 of the Bank Holding Com-
pany Act of 1956 for more than 1 year; and
‘‘(4) maintains its main office or any branch in
such State or political subdivision, or within 100
miles of such State or political subdivision.’’.
SEC. 108. INVESTMENT BANK HOLDING COMPANIES.
(a) DEFINITIONS.—Section 2 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1842) is amended by
adding at the end the following new subsections:
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‘‘(r) WHOLESALE FINANCIAL INSTITUTION.—The
term ‘wholesale financial institution’ means any institution
that is an uninsured state member bank authorized pursu-
ant to section 9B of the Federal Reserve Act.
‘‘(s) INVESTMENT BANK HOLDING COMPANY.—The
term ‘investment bank holding company’ means any bank
holding company that controls or seeks to control—
‘‘(1) a wholesale financial institution, and
‘‘(2) a company engaged in underwriting, dis-
tributing or dealing in securities pursuant to section
10.’’.
(b) EXEMPTION.—Section 4 of the Bank Holding
Company Act of 1956 (12 U.S.C. 1843) is amended by
adding at the end the following new subsection:
‘‘(l) PERMISSIBLE AFFILIATIONS FOR INVESTMENT
BANK HOLDING COMPANIES.—
‘‘(1) FINANCIAL ACTIVITIES.—
‘‘(A) ACTIVITIES
AUTHORIZED.—An in-
vestment bank holding company may directly or
indirectly own or control shares of any company
the activities of which the Board has deter-
mined to be of a financial nature, without re-
gard to the limitations contained in subsections
(k)(1) or (k)(3).
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‘‘(B) INSURANCE UNDERWRITING ACTIVI-
TIES LIMITED TO INCIDENTAL ACTIVITIES.—In
the event that the Board determines that insur-
ance underwriting activities (other than activi-
ties permissible under subsection (c)(8)) are fi-
nancial in nature, the aggregate investment by
an investment bank holding company in shares
of all companies that engage in insurance un-
derwriting activities (other than insurance un-
derwriting activities permissible under section
(c)(8)) shall not exceed 10 percent of the total
consolidated capital and surplus of the invest-
ment bank holding company.
‘‘(C) NOTICE REQUIRED.—An investment
bank holding company may not own or control
shares of any company described in subpara-
graph (A) without complying with the notice
procedures provided in subsection (j).
‘‘(2) SECURITIES ACTIVITIES.—
‘‘(A) INSTITUTIONS MUST BE WELL-CAP-
ITALIZED.—The Board shall disapprove a no-
tice under section 10 by an investment bank
holding company to acquire a securities affiliate
if any wholesale financial institution controlled
by the investment bank holding company is not
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well capitalized or would not be well capitalized
following the transaction.
‘‘(B) TRANSACTIONS WITH A SECURITIES
AFFILIATE.—
‘‘(i) IN GENERAL.—A wholesale finan-
cial institution controlled by an investment
bank holding company shall be a ‘bank’ for
purposes of the provisions of sections 23A
and 23B of the Federal Reserve Act.
‘‘(ii) OTHER
RESTRICTIONS
DETER-
MINED BY THE BOARD.—A securities affili-
ate and a wholesale financial institution
controlled by an investment bank holding
company shall not be subject to the provi-
sions of section 10(f), except that the secu-
rities affiliate and wholesale financial insti-
tution shall be subject to paragraphs (12)
and (13) of that section as if the wholesale
financial institution were an insured depos-
itory institution.
‘‘(3) LIMITATION
ON
AFFILIATION
WITH
IN-
SURED DEPOSITORY INSTITUTIONS.—An investment
bank holding company may not directly or indirectly
own or control—
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‘‘(A) any bank, other than a wholesale fi-
nancial institution;
‘‘(B) any savings association;
‘‘(C) any institution described in section
2(c)(2); or
‘‘(D) any institution that accepts—
‘‘(i) initial deposits of $100,000 or
less, other than on an incidental or occa-
sional basis, or
‘‘(ii) deposits that are insured under
the Federal Deposit Insurance Act.’’.
(c) CONFORMING AMENDMENTS.—
(1) INSURANCE REQUIREMENT IN THE BANK
HOLDING COMPANY ACT.—Section 3(e) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1842(e))
is amended by adding at the end the following:
‘‘This subsection does not apply to a wholesale fi-
nancial institution that is controlled by an invest-
ment bank holding company that controls no banks
other than wholesale financial institutions.’’.
(2) APPROPIATE FEDERAL BANKING AGENCY.—
Section 3(q)(2)(A) of the Federal Deposit Insurance
Act (12 U.S.C. 1813(q)(2)(A)) is amended to read
as follows:
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‘‘(A) any State member insured bank (ex-
cept a District bank) and wholesale financial in-
stitution as authorized pursuant to section 9B
of the Federal Reserve Act,’’.
SEC. 109. CONFORMING AMENDMENTS FOR INVESTMENT
BANK HOLDING COMPANIES.
(a) WHOLESALE FINANCIAL INSTITUTIONS.—The
Federal Reserve Act (12 U.S.C. 221 et seq.) is amended
by inserting after section 9A the following new section:
‘‘SEC. 9B. WHOLESALE FINANCIAL INSTITUTIONS.
‘‘(a) APPLICATION FOR MEMBERSHIP AS WHOLE-
SALE FINANCIAL INSTITUTION.—
‘‘(1) APPLICATION REQUIRED.—Any bank in-
corporated by special law of any State, or organized
under the general laws of any State, may apply to
the Board of Governors of the Federal Reserve Sys-
tem to subscribe to the stock of the Federal Reserve
bank organized within the district where the apply-
ing bank is located as a wholesale financial institu-
tion. Such application shall be treated as an applica-
tion under, and shall be subject to the provisions of
section 9.
‘‘(2) APPROVAL
OF
MEMBERSHIP.—No bank
may become a wholesale financial institution un-
less—
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‘‘(A) the Board has approved an applica-
tion by the bank, under such rules and regula-
tions and subject to such conditions and re-
quirements as the Board may prescribe, to be
a wholesale financial institution; and
‘‘(B) in the case of a bank that is insured
under the Federal Deposit Insurance Act, the
bank has met all requirements under that Act
for voluntary termination of deposit insurance.
‘‘(b) GENERAL
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) FEDERAL RESERVE ACT.—Except as oth-
erwise provided in this section, wholesale financial
institutions shall be member banks and shall be sub-
ject to the provisions of this Act that apply to mem-
ber banks to the same extent and in the same man-
ner as State member insured banks, except that the
wholesale financial institution may only terminate
membership under this Act with the prior written
approval of the Board and on terms and conditions
that the Board determines are appropriate to carry
out the purposes of this Act.
‘‘(2) PROMPT CORRECTIVE ACTION.—A whole-
sale financial institution shall be deemed to be an in-
sured depository institution for purposes of section
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38 of the Federal Deposit Insurance Act except
that—
‘‘(A) the relevant capital levels and capital
measures for each capital category shall be the
levels specified by the Board for wholesale fi-
nancial institutions in accordance with sub-
section (c);
‘‘(B) the provisions applicable to well cap-
italized insured depository institutions shall be
inapplicable to wholesale financial institutions;
‘‘(C) the provisions authorizing or requir-
ing an institution to be placed into receivership
shall not apply to a wholesale financial institu-
tion, and, in its place, the Board is authorized
or required, as the case may be, to terminate
the wholesale financial institution’s membership
in the Federal Reserve System or, where pro-
vided in section 38 of the Federal Deposit
Insurance 
Act, 
place 
the 
bank 
into
conservatorship and, in the Board’s discretion,
terminate the bank’s membership; and
‘‘(D) for purposes of applying the provi-
sions of section 38 of the Federal Deposit In-
surance Act to wholesale financial institutions,
all references to the appropriate Federal bank-
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ing agency or to the Corporation that section
shall be deemed to be references to the Board.
‘‘(3) ENFORCEMENT AUTHORITY.—Section 7 (j)
and (k), subsections (b) through (n), (s), (u), and
(v) of section 8, and section 19 of the Federal De-
posit Insurance Act shall apply to a wholesale finan-
cial institution in the same manner and to the same
extent as they apply to State member insured banks
and any reference in such sections to an insured de-
pository institution shall also be deemed to be a ref-
erence to a wholesale financial institution.
‘‘(4) CERTAIN
OTHER
STATUTES
APPLICA-
BLE.—A wholesale financial institution shall be
deemed to be a banking institution and the Board
shall be the appropriate Federal banking agency for
such bank and all of its affiliates for purposes of the
International Lending Supervision Act.
‘‘(5) BANK MERGER ACT.—A wholesale finan-
cial institution shall be subject to the provisions of
the Bank Merger Act in the same manner as if the
wholesale financial institution were a State member
insured bank for purposes of that Act.
‘‘(c) SPECIFIC
REQUIREMENTS
APPLICABLE
TO
WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(1) LIMITATIONS ON DEPOSITS.—
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‘‘(A) MINIMUM
AMOUNT.—Pursuant to
regulations of the Board, no wholesale financial
institution shall receive initial deposits of
$100,000 or less, other than on an incidental
and occasional basis and where such deposits in
no event represent more than 5 percent of the
institution’s total deposits.
‘‘(B) NO DEPOSIT INSURANCE.—No depos-
its held by a wholesale financial institution shall
be insured deposits under the Federal Deposit
Insurance Act.
‘‘(C) ADVERTISING
AND
DISCLOSURE.—
The Board shall prescribe regulations pertain-
ing to advertising and disclosure by wholesale
financial institutions to ensure that each deposi-
tor is notified that deposits at the wholesale fi-
nancial institution are not federally insured or
otherwise guaranteed by the United States Gov-
ernment.
‘‘(2) SPECIAL CAPITAL REQUIREMENTS APPLI-
CABLE TO WHOLESALE FINANCIAL INSTITUTIONS.—
‘‘(A) MINIMUM CAPITAL LEVELS.—
‘‘(i) IN GENERAL.—The Board shall,
by regulation, adopt capital requirements
for wholesale financial institutions. The
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capital levels for wholesale financial insti-
tutions shall be sufficiently higher than the
capital levels applicable to State member
insured banks—
‘‘(I) to account for the status of
wholesale financial institutions as in-
stitutions that accept deposits that
are not insured under the Federal De-
posit Insurance Act; and
‘‘(II) to provide for the safe and
sound operation of the wholesale fi-
nancial institution without undue risk
to creditors or other persons, includ-
ing Federal Reserve banks, engaged
in transactions with the bank.
‘‘(ii) MINIMUM
LEVERAGE
RATIO.—
The minimum leverage ratio of tier one
capital to total assets of wholesale financial
institutions shall be not less than the level
required for a State member insured bank
to be well capitalized.
‘‘(B) CAPITAL CATEGORIES FOR PROMPT
CORRECTIVE ACTION.—For purposes of apply-
ing the provisions of section 38 of Federal De-
posit Insurance Act, the Board shall, by regula-
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tion, establish, for each relevant capital meas-
ure specified by the Board under subparagraph
(A), the levels at which a wholesale financial
institution 
is 
adequately 
capitalized,
undercapitalized, significantly undercapitalized,
and critically undercapitalized.
‘‘(3) ADDITIONAL REQUIREMENTS APPLICABLE
TO WHOLESALE FINANCIAL INSTITUTIONS.—In addi-
tion to any requirements otherwise applicable to
State member banks or otherwise applicable under
this section, the Board may prescribe, by rule or
order, for wholesale financial institutions—
‘‘(A) limitations on transactions with affili-
ates to prevent an affiliate from gaining access
to, or the benefits of, credit from a Federal Re-
serve bank, including overdrafts at a Federal
Reserve bank;
‘‘(B) special clearing balance requirements;
and
‘‘(C) any additional requirements that the
Board determines to be appropriate or nec-
essary to—
‘‘(i) promote the safety and soundness
of the wholesale financial institution, or
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‘‘(ii) protect creditors and other per-
sons, including Federal Reserve banks, en-
gaged in transactions with the wholesale fi-
nancial institution.
‘‘(4) EXEMPTIONS FOR WHOLESALE FINANCIAL
INSTITUTIONS.—The Board may, by rule or order,
exempt any wholesale financial institution from any
provision applicable to a State member bank that is
not a wholesale financial institution, provided that
the Board finds that such exemption is not incon-
sistent with—
‘‘(i) the promotion of the safety and sound-
ness of the wholesale financial institution; and
‘‘(ii) the protection of creditors and other
persons, including Federal Reserve banks, en-
gaged in transactions with the wholesale finan-
cial institution.
‘‘(5) NO EFFECT ON OTHER PROVISIONS.—This
section shall not be construed to limit the Board’s
authority over member banks under any other provi-
sion of law, or to create any obligation for any Fed-
eral Reserve bank to make, increase, renew, or ex-
tend any advances or discount under this Act to any
member bank or other depository institution.
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‘‘(d) CONSERVATORSHIP AUTHORITY.—The Board is
authorized to appoint a conservator to take possession and
control of a wholesale financial institution to the same ex-
tent and in the same manner as the Comptroller of the
Currency is authorized to appoint a conservator for a na-
tional bank under section 203 of the Bank Conservation
Act.
‘‘(e) DEFINITIONS.—For purposes of this section—
‘‘(1) the term ‘wholesale financial institution’
means a bank whose application to become an unin-
sured State member bank has been approved by the
Board of Governors of the Federal Reserve System
under this section;
‘‘(2) the term ‘deposit’ has the meaning given
to such term by the Board under the Federal Re-
serve Act; and
‘‘(3) the term ‘State member insured bank’
means a State member bank, the deposits of which
are insured under the Federal Deposit Insurance
Act.’’.
(b) VOLUNTARY TERMINATION OF INSURED STATUS
BY CERTAIN INSTITUTIONS.—
(1) SECTION 8 DESIGNATIONS.—Section 8 of
the Federal Deposit Insurance Act (12 U.S.C. 1818)
is amended—
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(A) in the section heading, by inserting
‘‘INVOLUNTARY’’ after ‘‘SEC. 8’’; and
(B) in subsection (a)—
(i) by striking paragraph (1); and
(ii) by redesignating paragraphs (2)
through (9) as paragraphs (1) through (8),
respectively.
(2) VOLUNTARY
TERMINATION
OF
INSURED
STATUS.—The Federal Deposit Insurance Act (12
U.S.C. 1811 et seq.) is amended by inserting after
section 8 the following new section:
‘‘SEC. 8A. VOLUNTARY TERMINATION OF STATUS AS IN-
SURED DEPOSITORY INSTITUTION.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), an insured State-chartered bank or a national bank
may voluntarily terminate its status as an insured deposi-
tory institution in accordance with regulations of the Cor-
poration if—
‘‘(1) such institution provides written notice of
its intent to terminate its insured status—
‘‘(A) to the Corporation, not less than 6
months before the effective date of such termi-
nation; and
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‘‘(B) to its depositors, not less than 6
months before the effective date of such termi-
nation; and
‘‘(2) the deposit insurance fund of which such
bank is a member equals or exceeds the fund’s des-
ignated reserve ratio as set forth in section
7(b)(2)(A)(iv) of the Federal Deposit Insurance Act
(12 U.S.C. 1817(b)(2)(A)(iv) as of the date the
bank provides a written notice of its intent to termi-
nate its insured status.
‘‘(b) EXCEPTION.—The option to terminate insured
status under subsection (a) shall not be available to—
‘‘(1) an insured savings association;
‘‘(2) an insured branch that is required to be
insured under subsection (a) or (b) of section 6 of
the International Banking Act of 1978; or
‘‘(3) any institution described in section 2(c)(2)
of the Bank Holding Company Act of 1956.
‘‘(c) ELIGIBILITY FOR INSURANCE TERMINATED.—
A depository institution that voluntarily elects to termi-
nate its insured status under subsection (a) shall not re-
ceive insurance of any of its deposits or any other assist-
ance authorized under this Act after the period specified
in subsection (f)(1).
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this section shall not advertise or hold itself out as
having insured deposits, except that it may advertise
the temporary insurance of deposits under sub-
section (f) if, in connection with any such advertise-
ment, it shall also state with equal prominence that
additions to deposits and new deposits made after
the effective date of the termination are not insured.
‘‘(2) CERTIFICATES OF DEPOSIT, OBLIGATIONS,
AND
SECURITIES.—Any certificate of deposit or
other obligation or security issued by a State-char-
tered bank or a national bank after the effective
date of the voluntary termination of its insured sta-
tus under this section shall be accompanied by a
conspicuous, prominently displayed notice that such
certificate of deposit or other obligation or security
is not insured under this Act.
‘‘(h) NOTICE REQUIREMENTS.—
‘‘(1) NOTICE TO THE CORPORATION.—The no-
tice to the Corporation of an institution’s intent to
terminate its insured status required under sub-
section (a) shall be in such form as the Corporation
may require.
‘‘(2) NOTICE TO DEPOSITORS.—The notice to
depositors of an institution’s intent to terminate its
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insured status required under subsection (a) shall
be—
‘‘(A) at such depositor’s last address of
record with the institution; and
‘‘(B) in such manner and form as the Cor-
poration finds to be necessary and appropriate
for the protection of depositors.’’.
SEC. 110. EFFECTIVE DATE.
The amendments made by this subtitle shall become
effective 90 days after the date of enactment of this Act.
Subtitle B—Brokers and Dealers
SEC. 120. DEFINITION OF BROKER.
Section 3(a)(4) of the Securities Exchange Act of
1934 (15 U.S.C. 78c(a)(4)) is amended to read as follows:
‘‘(4) ‘BROKER’.—
‘‘(A) IN
GENERAL.—The term ‘broker’
means any person engaged in the business of
effecting transactions in securities for the ac-
count of others.
‘‘(B) EXCLUSION
OF
BANKS.—The term
‘broker’ does not include a bank unless such
bank publicly solicits the business of effecting
securities transactions for the account of others
or is compensated for such business by the pay-
ment of commissions or similar remuneration
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based on effecting transactions in securities
(other than fees calculated as a percentage of
assets under management) in excess of the
bank’s incremental costs directly attributable to
effecting such transactions (hereafter referred
to as ‘incentive compensation’).
‘‘(C) EXEMPTION FOR CERTAIN BANK AC-
TIVITIES.—A bank shall not be deemed to be a
‘broker’ because it engages in any of the follow-
ing activities:
‘‘(i) THIRD
PARTY
BROKERAGE
AR-
RANGEMENTS.—The bank enters into a
contractual or other arrangement with a
broker or dealer registered under this title
under which the broker or dealer offers
brokerage services on or off the premises
of the bank if—
‘‘(I) such broker or dealer is
clearly identified as the person per-
forming the brokerage services;
‘‘(II) such broker or dealer per-
forms brokerage services in an area
that is clearly marked and physically
separate from the retail deposit-taking
activities of the bank;
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‘‘(III) any materials used to ad-
vertise or promote the availability of
brokerage services under the contrac-
tual or other arrangement are ap-
proved by the broker or dealer for
compliance with the Federal securities
laws prior to distribution and are
deemed to be the materials of the
broker or dealer;
‘‘(IV) bank employees perform
only clerical or ministerial functions in
connection 
with 
brokerage 
trans-
actions, unless such employees are as-
sociated persons of a broker or dealer
and are qualified pursuant to the re-
quirements of a self-regulatory organi-
zation;
‘‘(V) bank employees do not re-
ceive incentive compensation for any
brokerage activities unless such em-
ployees are associated persons of a
broker or dealer and are qualified
pursuant to the requirements of a
self-regulatory organization;
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‘‘(VI) such services are provided
by the broker or dealer on a basis in
which all customers that receive such
services are fully disclosed to that
broker or dealer; and
‘‘(VII) the broker or dealer in-
forms each customer that the broker-
age services are provided by the
broker or dealer and not by the bank
and that the securities are not guar-
anteed by the bank, the Federal De-
posit Insurance Corporation, or any
other federal or state deposit guaran-
tee fund relating to banks.
‘‘(ii) TRUST
ACTIVITIES.—The bank
engages 
in 
trust 
activities 
(including
effecting transactions in the course of such
trust activities) permissible for national
banks under the first section of the Act of
September 28, 1962 or for State banks
under relevant State trust statutes or law
(including securities safekeeping, self-di-
rected individual retirement accounts, or
managed agency accounts or other func-