503
‘‘(A) that is under the direct supervision of
an officer or officers designated by the board of
directors of the bank as responsible for the day-
to-day conduct of the bank’s investment adviser
activities for one or more investment companies,
including the supervision of all bank employees
engaged in the performance of such activities;
and
‘‘(B) for which all of the records relating to
its investment adviser activities are separately
maintained in or extractable from such unit’s
own facilities or the facilities of the bank, and
such records are so maintained or otherwise ac-
cessible as to permit independent examination
and enforcement by the Commission of this Act
or the Investment Company Act of 1940 and
rules and regulations promulgated under this
Act or the Investment Company Act of 1940.’’.
SEC. 218. DEFINITION OF BROKER UNDER THE INVEST-
MENT ADVISERS ACT OF 1940.
Section 202(a)(3) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(3)) is amended to read as follows:
‘‘(3) The term ‘broker’ has the same meaning as
in section 3 of the Securities Exchange Act of 1934.’’.
504
SEC. 219. DEFINITION OF DEALER UNDER THE INVESTMENT
ADVISERS ACT OF 1940.
Section 202(a)(7) of the Investment Advisers Act of
1940 (15 U.S.C. 80b–2(a)(7)) is amended to read as follows:
‘‘(7) The term ‘dealer’ has the same meaning as
in section 3 of the Securities Exchange Act of 1934,
but does not include an insurance company or invest-
ment company.’’.
SEC. 220. INTERAGENCY CONSULTATION.
The Investment Advisers Act of 1940 (15 U.S.C. 80b–
1 et seq.) is amended by inserting after section 210 the fol-
lowing new section:
‘‘SEC. 210A. CONSULTATION.
‘‘(a) EXAMINATION RESULTS AND OTHER INFORMA-
TION.—
‘‘(1) The appropriate Federal banking agency
shall provide the Commission upon request the results
of any examination, reports, records, or other infor-
mation to which such agency may have access with
respect to the investment advisory activities—
‘‘(A) of any—
‘‘(i) bank holding company;
‘‘(ii) bank; or
‘‘(iii) separately identifiable depart-
ment or division of a bank, that is reg-
istered under section 203 of this title; and
505
‘‘(B) in the case of a bank holding company
or bank that has a subsidiary or a separately
identifiable department or division registered
under that section, of such bank or bank holding
company.
‘‘(2) The Commission shall provide to the appro-
priate Federal banking agency upon request the re-
sults of any examination, reports, records, or other
information with respect to the investment advisory
activities of any bank holding company, bank, or sep-
arately identifiable department or division of a bank,
any of which is registered under section 203 of this
title.
‘‘(b) EFFECT ON OTHER AUTHORITY.—Nothing in this
section shall limit in any respect the authority of the appro-
priate Federal banking agency with respect to such bank
holding company, bank, or department or division under
any provision of law.
‘‘(c) DEFINITION.—For purposes of this section, the
term ‘appropriate Federal banking agency’ has the same
meaning as in section 3 of the Federal Deposit Insurance
Act.’’.
SEC. 221. TREATMENT OF BANK COMMON TRUST FUNDS.
(a) SECURITIES ACT OF 1933.—Section 3(a)(2) of the
Securities Act of 1933 (15 U.S.C. 77c(a)(2)) is amended
506
by striking ‘‘or any interest or participation in any com-
mon trust fund or similar fund maintained by a bank ex-
clusively for the collective investment and reinvestment of
assets contributed thereto by such bank in its capacity as
trustee, executor, administrator, or guardian’’ and insert-
ing ‘‘or any interest or participation in any common trust
fund or similar fund that is excluded from the definition
of the term ‘investment company’ under section 3(c)(3) of
the Investment Company Act of 1940’’.
(b) SECURITIES EXCHANGE ACT OF 1934.—Section
3(a)(12)(A)(iii) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(12)(A)(iii)) is amended to read as follows:
‘‘(iii) any interest or participation in any
common trust fund or similar fund that is ex-
cluded from the definition of the term ‘invest-
ment company’ under section 3(c)(3) of the In-
vestment Company Act of 1940;’’.
(c) INVESTMENT COMPANY ACT
OF 1940.—Section
3(c)(3) of the Investment Company Act of 1940 (15 U.S.C.
80a–3(c)(3)) is amended by inserting before the period the
following: ‘‘, if—
‘‘(A) such fund is employed by the bank
solely as an aid to the administration of trusts,
estates, or other accounts created and main-
tained for a fiduciary purpose;
507
‘‘(B) except in connection with the ordinary
advertising of the bank’s fiduciary services, in-
terests in such fund are not—
‘‘(i) advertised; or
‘‘(ii) offered for sale to the general pub-
lic; and
‘‘(C) fees and expenses charged by such fund
are not in contravention of fiduciary principles
established under applicable Federal or State
law’’.
SEC. 222. INVESTMENT ADVISERS PROHIBITED FROM HAV-
ING 
CONTROLLING 
INTEREST 
IN 
REG-
ISTERED INVESTMENT COMPANY.
Section 15 of the Investment Company Act of 1940 (15
U.S.C. 80a–15) is amended by adding at the end the follow-
ing new subsection:
‘‘(g) CONTROLLING INTEREST IN INVESTMENT COM-
PANY PROHIBITED.—
‘‘(1) IN GENERAL.—If an investment adviser to
a registered investment company, or an affiliated per-
son of that investment adviser, holds a controlling in-
terest in that registered investment company in a
trustee or fiduciary capacity, such person shall—
‘‘(A) if it holds the shares in a trustee or fi-
duciary capacity with respect to any employee
508
benefit plan subject to the Employee Retirement
Income Security Act of 1974, transfer the power
to vote the shares of the investment company
through to another person acting in a fiduciary
capacity with respect to the plan who is not an
affiliated person of that investment adviser or
any affiliated person thereof; or
‘‘(B) if it holds the shares in a trustee or fi-
duciary capacity with respect to any person or
entity other than an employee benefit plan sub-
ject to the Employee Retirement Income Security
Act of 1974—
‘‘(i) transfer the power to vote the
shares of the investment company through
to—
‘‘(I) the beneficial owners of the
shares;
‘‘(II) another person acting in a
fiduciary capacity who is not an affili-
ated person of that investment adviser
or any affiliated person thereof; or
‘‘(III) any person authorized to
receive statements and information
with respect to the trust who is not an
510
SEC. 223. CONFORMING CHANGE IN DEFINITION.
Section 2(a)(5) of the Investment Company Act of
1940 (15 U.S.C. 80a–2(a)(5)) is amended by striking ‘‘(A)
a banking institution organized under the laws of the
United States’’ and inserting ‘‘(A) a depository institution
(as defined in section 3 of the Federal Deposit Insurance
Act) or a branch or agency of a foreign bank (as such terms
are defined in section 1(b) of the International Banking Act
of 1978)’’.
SEC. 224. CONFORMING AMENDMENT.
Section 202 of the Investment Advisers Act of 1940 (15
U.S.C. 80b–2) is amended by adding at the end the follow-
ing new subsection:
‘‘(c) CONSIDERATION OF PROMOTION OF EFFICIENCY,
COMPETITION, AND CAPITAL FORMATION.—Whenever pur-
suant to this title the Commission is engaged in rulemaking
and is required to consider or determine whether an action
is necessary or appropriate in the public interest, the Com-
mission shall also consider, in addition to the protection
of investors, whether the action will promote efficiency, com-
petition, and capital formation.’’.
SEC. 225. EFFECTIVE DATE.
This subtitle shall take effect 90 days after the date
of the enactment of this Act.
511
Subtitle 
C—Securities 
and 
Ex-
change Commission Supervision
of 
Investment 
Bank 
Holding
Companies
SEC. 231. SUPERVISION OF INVESTMENT BANK HOLDING
COMPANIES BY THE SECURITIES AND EX-
CHANGE COMMISSION.
(a) AMENDMENT.—Section 17 of the Securities Ex-
change Act of 1934 (15 U.S.C. 78q) is amended—
(1) by redesignating subsection (i) as subsection
(l); and
(2) by inserting after subsection (h) the following
new subsections:
‘‘(i) INVESTMENT BANK HOLDING COMPANIES.—
‘‘(1) ELECTIVE SUPERVISION OF AN INVESTMENT
BANK HOLDING COMPANY NOT HAVING A BANK OR
SAVINGS ASSOCIATION AFFILIATE.—
‘‘(A) IN
GENERAL.—An investment bank
holding company that is not—
‘‘(i) an affiliate of a wholesale finan-
cial institution, an insured bank (other
than an institution described in subpara-
graph (D), (F), or (G) of section 2(c)(2), or
held under section 4(f), of the Bank Holding
512
Company Act of 1956), or a savings asso-
ciation;
‘‘(ii) a foreign bank, foreign company,
or company that is described in section 8(a)
of the International Banking Act of 1978;
or
‘‘(iii) a foreign bank that controls, di-
rectly or indirectly, a corporation chartered
under section 25A of the Federal Reserve
Act,
may elect to become supervised by filing with the
Commission a notice of intention to become su-
pervised, pursuant to subparagraph (B) of this
paragraph. Any investment bank holding com-
pany filing such a notice shall be supervised in
accordance with this section and comply with the
rules promulgated by the Commission applicable
to supervised investment bank holding compa-
nies.
‘‘(B) NOTIFICATION OF STATUS AS A SUPER-
VISED INVESTMENT BANK HOLDING COMPANY.—
An investment bank holding company that elects
under subparagraph (A) to become supervised by
the Commission shall file with the Commission a
written notice of intention to become supervised
513
by the Commission in such form and containing
such information and documents concerning such
investment bank holding company as the Com-
mission, by rule, may prescribe as necessary or
appropriate in furtherance of the purposes of
this section. Unless the Commission finds that
such supervision is not necessary or appropriate
in furtherance of the purposes of this section,
such supervision shall become effective 45 days
after the date of receipt of such written notice
by the Commission, or within such shorter time
period as the Commission, by rule or order, may
determine.
‘‘(2) ELECTION NOT TO BE SUPERVISED BY THE
COMMISSION AS AN INVESTMENT BANK HOLDING COM-
PANY.—
‘‘(A) VOLUNTARY WITHDRAWAL.—A super-
vised investment bank holding company that is
supervised pursuant to paragraph (1) may, upon
such terms and conditions as the Commission
deems necessary or appropriate, elect not to be
supervised by the Commission by filing a written
notice of withdrawal from Commission super-
vision. Such notice shall not become effective
until one year after receipt by the Commission,
514
or such shorter or longer period as the Commis-
sion deems necessary or appropriate to ensure ef-
fective supervision of the material risks to the su-
pervised investment bank holding company and
to the affiliated broker or dealer, or to prevent
evasion of the purposes of this section.
‘‘(B) DISCONTINUATION OF COMMISSION SU-
PERVISION.—If the Commission finds that any
supervised investment bank holding company
that is supervised pursuant to paragraph (1) is
no longer in existence or has ceased to be an in-
vestment bank holding company, or if the Com-
mission finds that continued supervision of such
a supervised investment bank holding company
is not consistent with the purposes of this sec-
tion, the Commission may discontinue the super-
vision pursuant to a rule or order, if any, pro-
mulgated by the Commission under this section.
‘‘(3) SUPERVISION OF INVESTMENT BANK HOLD-
ING COMPANIES.—
‘‘(A) RECORDKEEPING AND REPORTING.—
‘‘(i) IN
GENERAL.—Every supervised
investment bank holding company and each
affiliate thereof shall make and keep for pre-
scribed periods such records, furnish copies