133
‘‘(i) IN GENERAL.—At least 12 business
days prior to commencing any activity
(other than an activity described in sub-
paragraph (A)) or acquiring shares or as-
sets of any company in a proposal that
qualifies under paragraph (4), the financial
services holding company shall provide
written notice to the Board of the proposal,
unless the Board determines that no notice
or a shorter notice period is appropriate.
‘‘(ii) DESCRIPTION OF PROPOSED AC-
TIVITIES.—A notice under clause (i) shall
include a description of the proposed activi-
ties and the terms of any proposed acquisi-
tion.
‘‘(6) ADJUSTMENT
OF
AMOUNTS.—The Board
may, by regulation, adjust the amounts and the man-
ner in which the percentage of depository institutions
is calculated under subparagraph (B)(i), (B)(iii)(II),
or (D) of paragraph (4) if the Board determines that
any such adjustment is consistent with safety and
soundness and the purposes of this Act.
‘‘(7) EXPEDITED PROCEDURE FOR NEW ACTIVI-
TIES.—
134
‘‘(A) 
EXPEDITED
PREACQUISITION
RE-
VIEW.—After the end of the 12-day period re-
ferred to in paragraph (5)(C) and subject to any
final ruling under subparagraph (B), a financial
services holding company may acquire a com-
pany engaged in activities that the company be-
lieves are financial in nature for purposes of
subsection (c)(8) and that the Board has not pre-
viously reviewed under such subsection if—
‘‘(i) the proposal qualifies under all of
the criteria in paragraph (4) other than
paragraph (4)(C);
‘‘(ii) the financial services holding
company provides the notice required under
paragraph (5)(C), and includes with such
notice an explanation of the facts and cir-
cumstances that provide a reasonable basis
for concluding that the proposed activities
are financial in nature or incidental to
such financial activities; and
‘‘(iii) before the end of such 12-day pe-
riod, the Board has not—
‘‘(I) required a notice under para-
graph (1) with respect to the proposed
transaction; or
135
‘‘(II) advised the financial serv-
ices holding company that the com-
pany has failed to provide a reasonable
basis for concluding that the proposed
activities are financial in nature or
incidental to such financial activities.
‘‘(B) POSTACQUISITION REVIEW.—
‘‘(i) NOTICE PROCEDURE.—A financial
services holding company which is per-
mitted to make an acquisition under this
paragraph shall file a notice with the Board
in accordance with paragraph (1) before the
end of the 30-day period beginning on the
date of the consummation of the acquisition.
‘‘(ii) LIMITED REVIEW.—The Board’s
review of a postconsummation notice re-
quired under this subparagraph shall be
limited to determining whether the proposed
activities are permissible under subsection
(c)(8), including whether the proposal meets
the criteria in paragraph (2)(A).
‘‘(iii) CONDITIONAL ACTION.—No pro-
vision of this paragraph shall be construed
as limiting in any way the authority of the
Board under this section to impose condi-
136
tions on the conduct of any activity or the
ownership of any company.
‘‘(iv) DIVESTITURE OF IMPERMISSIBLE
ACTIVITIES.—If the Board determines that
any proposed activity is not permissible
under subsection (c)(8), the financial serv-
ices holding company shall terminate the
activity or divest the company acquired in
reliance on this paragraph before the end of
the 2-year period beginning on the date of
such determination.
‘‘(C) INITIAL
DECISION
NOT
PREJUDICIAL
TO
SUBSEQUENT
DETERMINATION.—A decision
by the Board under subparagraph (A) not to re-
quire a notice under paragraph (1) during the
12-day period referred to in such subparagraph
shall not prejudice the Board’s decision under
subparagraph (B).’’.
SEC. 123. STREAMLINED EXAMINATION AND REPORTING
REQUIREMENTS FOR ALL FINANCIAL SERV-
ICES HOLDING COMPANIES.
Section 5(c) of the Bank Holding Company Act of
1956 (12 U.S.C. 1844(c)) is amended to read as follows—
‘‘(c) REPORTS AND EXAMINATIONS.—
‘‘(1) PURPOSES.—
137
‘‘(A) IN
GENERAL.—The purpose of this
subsection is to authorize the Board, through re-
ports and examinations, to gather information
from a financial services holding company and
the subsidiaries of any such holding company re-
garding the structure, activities, and financial
condition of the financial services holding com-
pany and such subsidiaries so that the Board
can monitor risks within the holding company
system that could adversely affect any depository
institution subsidiary of the holding company
and may monitor and enforce compliance with
this Act.
‘‘(B) PURPOSE NOT TO IMPOSE ADDITIONAL
BURDENS ON HOLDING COMPANIES.—It is the in-
tended purpose of this subsection that the Board
shall—
‘‘(i) exercise the Board’s authority to
collect information under this section in a
manner that is the least burdensome to fi-
nancial services holding companies and the
subsidiaries of such companies; and
‘‘(ii) rely, to the fullest extent possible,
on reports prepared for and examinations
138
conducted by or for other Federal and State
supervisors.
‘‘(C) PURPOSE
TO
REQUIRE
CAREFULLY
TAILORED
EXAMINATIONS.—It is the intended
purpose of this subsection that the Board shall
tailor the focus and scope of any examination
under this section to a financial services holding
company or to any subsidiary of such company
which, because of financial conditions, activities,
operations of such subsidiary, the transactions
between such subsidiary and other affiliates, or
the size of any such subsidiary poses a potential
material risk to a depository institution subsidi-
ary of such holding company.
‘‘(2) REPORTS.—
‘‘(A) IN GENERAL.—The Board from time to
time may require any financial services holding
company and any subsidiary of such company
to submit reports under oath to keep the Board
informed as to—
‘‘(i) the company’s or the subsidiary’s
activities, financial condition, policies, sys-
tems for monitoring and controlling finan-
cial and operational risks, and transactions
139
with depository institution subsidiaries of
the holding company; and
‘‘(ii) the extent to which the company
or subsidiary has complied with the provi-
sions of this Act and regulations prescribed
and orders issued under this Act.
‘‘(B) USE OF EXISTING REPORTS.—
‘‘(i) IN GENERAL.—The Board shall, to
the fullest extent possible, accept reports in
fulfillment of the Board’s reporting require-
ments under this paragraph that a finan-
cial services holding company or any sub-
sidiary of such company has been required
to provide to other Federal and State super-
visors or to appropriate self-regulatory or-
ganizations.
‘‘(ii) AVAILABILITY.—A financial serv-
ices holding company or a subsidiary of
such company shall provide to the Board, at
the request of the Board, a report referred to
in clause (i).
‘‘(3) EXAMINATIONS.—
‘‘(A) LIMITED
USE
OF
EXAMINATION
AU-
THORITY.—The Board may make examinations
140
of each financial services holding company and
each subsidiary of such company in order to—
‘‘(i) inform the Board of the nature of
the operations and financial condition of
the financial services holding company and
such subsidiaries;
‘‘(ii) inform the Board of the—
‘‘(I) financial and operational
risks within the financial services hold-
ing company system that may affect
any depository institution owned by
such holding company; and
‘‘(II) the systems of the holding
company and such subsidiaries for
monitoring and controlling those risks;
and
‘‘(iii) monitor compliance with the
provisions of this Act and those governing
transactions and relationships between any
depository institution controlled by a finan-
cial services holding company and any of
the company’s other subsidiaries.
‘‘(B) RESTRICTED
FOCUS
OF
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, limit the focus and scope of any exam-
141
ination of a financial services holding company
to—
‘‘(i) the holding company; and
‘‘(ii) to any subsidiary (other than a
depository institution subsidiary) of the
holding company which, because of the size,
condition, or activities of the subsidiary, the
nature or size of transactions between such
subsidiary and any depository institution
affiliate, or the centralization of functions
within the holding company system, could
have a materially adverse effect on the safe-
ty and soundness of any depository institu-
tion affiliate of the subsidiary or of the
holding company.
‘‘(C) 
DEFERENCE
TO
BANK
EXAMINA-
TIONS.—The Board shall, to the fullest extent
possible, use the report of examinations of depos-
itory institutions made by the Comptroller of the
Currency, the Federal Deposit Insurance Cor-
poration, the Office of Thrift Supervision or the
appropriate State depository institution super-
visory authority for the purposes of this section.
‘‘(D) DEFERENCE
TO
OTHER
EXAMINA-
TIONS.—The Board shall, to the fullest extent
142
possible, use the reports of examination made
of—
‘‘(i) any registered broker or dealer by
or on behalf of the Securities Exchange
Commission, and
‘‘(ii) any other subsidiary that the
Board finds to be comprehensively super-
vised under relevant Federal or State law
by a Federal or state agency or authority.
‘‘(E) CONFIDENTIALITY OF REPORTED IN-
FORMATION.—
‘‘(i) IN
GENERAL.—Notwithstanding
any other provision of law, the Board shall
not be compelled to disclose any information
required to be reported under this para-
graph, or any information supplied to the
Board by any domestic or foreign regu-
latory agency, that relates to the financial
or operational condition of any financial
services holding company or any subsidiary
of such company.
‘‘(ii) COMPLIANCE
WITH
REQUESTS
FOR
INFORMATION.—No provision of this
subparagraph shall be construed as author-
izing the Board to withhold information
143
from Congress, or preventing the Board
from complying with a request for informa-
tion from any other Federal department or
agency for purposes within the scope of such
department’s or agency’s jurisdiction, or
from complying with an order of a court of
competent jurisdiction in an action brought
by the United States or the Board.
‘‘(iii) COORDINATION
WITH
OTHER
LAW.—For purposes of section 552 of title 5,
United States Code, this subparagraph shall
be considered to be a statute described in
subsection (b)(3)(B) of such section.
‘‘(iv) DESIGNATION OF CONFIDENTIAL
INFORMATION.—In prescribing regulations
to carry out the requirements of this sub-
section, the Board shall designate informa-
tion described in or obtained pursuant to
this paragraph as confidential information.
‘‘(F) COSTS.—The cost of any examination
conducted by the Board under this section may
be assessed against, and made payable by, such
holding company.’’.
144
SEC. 124. HOLDING COMPANY SUPERVISION FOR FINAN-
CIAL SERVICES HOLDING COMPANIES EN-
GAGED PRIMARILY IN NONBANKING ACTIVI-
TIES.
Section 5 of the Bank Holding Company Act of 1956
(12 U.S.C. 1844) is amended by adding at the end the fol-
lowing new subsection:
‘‘(g) REDUCED SUPERVISION
OF COMPANIES CON-
TROLLING PRINCIPALLY NONDEPOSITORY INSTITUTIONS.—
‘‘(1) ELECTION.—
‘‘(A) IN GENERAL.—Any financial services
holding company that qualifies under paragraph
(2) may make an election to be governed by the
approval, capital, reporting and examination re-
quirements of paragraphs (3), (4), (5) and (6)
by—
‘‘(i) filing a written notice of such elec-
tion with the Board; and
‘‘(ii) if applicable, providing a written
guarantee to the Federal Deposit Insurance
Corporation pursuant to paragraph (2).
‘‘(B) EFFECTIVE PERIOD OF ELECTION.—
An election under subparagraph (A) shall re-
main in effect—
145
‘‘(i) so long as the financial services
holding company continues to qualify under
paragraph (2); or
‘‘(ii) until the financial services hold-
ing company revokes the election.
‘‘(2) CRITERIA
FOR
ELECTION.—A financial
services holding company may make an election
under paragraph (1) if the company meets all of the
following criteria:
‘‘(A) 
COMPANY
PRINCIPALLY
CONTROLS
NONDEPOSITORY COMPANIES.—
‘‘(i) FINANCIAL
SERVICES
HOLDING
COMPANIES
WITH
DEPOSITORY
INSTITU-
TIONS.—In the case of a financial services
holding company (other than an investment
bank holding company), the consolidated
total risk-weighted assets of all depository
institutions and foreign banks (as defined
in section 1(b)(7) of the International
Banking Act of 1978) controlled by the fi-
nancial services holding company—
‘‘(I) constitute less than 10 per-
cent of the consolidated total risk-
weighted assets of such company; and
‘‘(II) are less than $5,000,000,000.
146
‘‘(ii) INVESTMENT BANK HOLDING COM-
PANIES.—In the case of an investment bank
holding company, the consolidated total
risk-weighted assets of all wholesale finan-
cial institutions controlled by the invest-
ment bank holding company—
‘‘(I) constitute less than 25 per-
cent of the consolidated total risk-
weighted assets of such company; and
‘‘(II) 
are 
less 
than
$15,000,000,000.
‘‘(iii) INFLATION
ADJUSTMENT.—The
dollar limitation contained in clauses
(i)(II) and (ii)(II) shall be adjusted annu-
ally after December 31, 1995, by the annual
percentage increase in the Consumer Price
Index for Urban Wage Earners and Clerical
Workers published by the Bureau of Labor
Statistics.
‘‘(iv) AUTHORITY
TO
INCREASE
LIM-
ITS.—The Board may increase any of the
percentages referred to in clauses (i)(I) and
(ii)(I) and the dollar amounts described in
clauses (i)(II) and (ii)(II) as the Board
may determine to be appropriate.
147
‘‘(B) WELL CAPITALIZED INSTITUTIONS.—
Each depository institution controlled by the fi-
nancial services holding company is well capital-
ized.
‘‘(C) WELL MANAGED INSTITUTIONS.—
‘‘(i) IN
GENERAL.—Each depository
institution controlled by the financial serv-
ices holding company received a CAMEL
composite rating of 1 or 2 (or an equivalent
rating under an equivalent rating system)
in the most recent examination of such in-
stitution.
‘‘(ii) EXCLUSION
FOR
NEWLY
AC-
QUIRED INSTITUTIONS.—A depository insti-
tution acquired by a financial services hold-
ing company during the 12-month period
ending on the date of the election by such
company under paragraph (1) may be ex-
cluded for purposes of clause (i) if the fi-
nancial services holding company has devel-
oped a plan acceptable to the appropriate
Federal banking agency (for such institu-
tion) to restore the capital and management
of the institution.
‘‘(D) HOLDING COMPANY GUARANTEE.—
148
‘‘(i) IN GENERAL.—The financial serv-
ices holding company provides a written
guarantee acceptable to the Federal Deposit
Insurance Corporation to maintain the cap-
ital levels of each insured depository insti-
tution controlled by the financial services
holding company at not less than the levels
required for such institution to remain well
capitalized.
‘‘(ii) LIMITATION ON LIABILITY.—The
liability of a financial services holding com-
pany under a guarantee provided under
this subparagraph shall not exceed an
amount equal to 10 percent of the total risk-
weighted assets of the insured depository in-
stitution, measured as of the date that the
institution becomes undercapitalized.
‘‘(iii) DURATION
OF
GUARANTEE.—
Notwithstanding paragraph (1), a financial
services holding company that has elected
treatment under this subsection shall con-
tinue to be bound by the guarantee made
under this subsection until released in ac-
cordance with this subparagraph.
149
‘‘(iv) RELEASE FROM LIABILITY.—The
Board shall release a financial services
holding company from the guarantee appli-
cable with respect to any depository institu-
tion subsidiary of such company—
‘‘(I) upon the written request of
the financial services holding company
to revoke the company’s election under
paragraph (1) if the Board determines
that each depository institution con-
trolled by the financial services holding
company is well capitalized and well
managed at the time of such revoca-
tion;
‘‘(II) in the case of a financial
services holding company which no
longer meets the requirements of sub-
paragraph (A), upon a determination
by the Board that each depository in-
stitution controlled by the financial
services holding company is well cap-
italized and well managed;
‘‘(III) upon the written request of
the financial services holding company
following the divestiture of control of
150
the depository institution in a trans-
action that does not require Federal as-
sistance if the Board determines that,
immediately following the divestiture,
the depository institution is or will be
well capitalized; or
‘‘(IV) upon a determination by
the Board, after consultation with the
Federal Deposit Insurance Corpora-
tion, that, subject to the limit on liabil-
ity provided in clause (ii), the finan-
cial services holding company has fully
performed under the guarantee.
‘‘(E) 
RESPONSIVENESS
TO
COMMUNITY
NEEDS.—The lead insured depository institution
subsidiary of the financial services holding com-
pany and insured depository institutions con-
trolling at least 80 percent of the aggregate total
risk-weighted assets of insured depository institu-
tions controlled by the financial services holding
company have achieved a ‘satisfactory record of
meeting community credit needs’, or better, dur-
ing the most recent examination of such insured
depository institutions.
151
‘‘(3) NO NOTICE OR APPROVAL REQUIRED FOR
CERTAIN PURPOSES UNDER PARAGRAPHS (8), (13), OR
(15) OF SECTION 4(c).—
‘‘(A) IN GENERAL.—Notwithstanding para-
graphs (8), (13), and, in the case of an invest-
ment bank holding company, (15) of section 4(c),
a financial services holding company that has in
effect an election under paragraph (1), and any
subsidiary of such holding company, may, with-
out prior notice to, or the approval of, the Board
under paragraph (8), (13), or, in the case of an
investment bank holding company, (15) of sec-
tion 4(c), engage de novo in any activity, or ac-
quire shares of any company engaged in any ac-
tivity, if—
‘‘(i) the Board has determined, by
order or regulation in effect at the time the
company or subsidiary commences to en-
gage in such activity or acquire such shares,
that the activity is permissible for a finan-
cial services holding company or a subsidi-
ary of such company to engage in under
paragraph (8) or (13) of section 4(c) (and
regulations prescribed under such para-
graphs); and
152
‘‘(ii) the activity is conducted in com-
pliance with all conditions and limitations
applicable to such activity under any regu-
lation, order, or advisory opinion prescribed
or issued by the Board.
‘‘(B) SUBSEQUENT
NOTICE.—A financial
services holding company that commences to en-
gage in an activity, or makes an acquisition, in
accordance with subparagraph (A) shall inform
the Board of such fact, in writing, not later than
10 days after commencing the activity or con-
summating the acquisition.
‘‘(4) CAPITAL.—
‘‘(A) IN
GENERAL.—The Board shall not
(by regulation or order), directly or indirectly,
establish or apply minimum capital require-
ments to a financial services holding company
which has in effect an election under paragraph
(1) unless the Board concludes, on the basis of all
information available to the Board, that the fi-
nancial services holding company is not main-
taining sufficient financial resources to meet
fully any guarantee required under paragraph
(2).
153
‘‘(B) CRITERIA FOR CONSIDERATION.—For
purposes of making a determination under sub-
paragraph (A), the Board shall consider, in ad-
dition to any other relevant considerations, the
financial condition and the adequacy of the cap-
ital of each of the depository institutions con-
trolled by the financial services holding com-
pany.
‘‘(5) REPORTS.—
‘‘(A) IN GENERAL.—The reporting require-
ments contained in subsection (c)(2) shall apply
to a financial services holding company which
qualifies under this subsection, to the extent pro-
vided by the Board.
‘‘(B) EXEMPTIONS
FROM
REPORTING
RE-
QUIREMENTS.—
‘‘(i) IN GENERAL.—The Board may, by
regulation or order, exempt any company
or class of companies, under such terms and
conditions and for such periods as the
Board shall provide in such regulation or
order, from the provisions of this paragraph
and any regulations prescribed under this
paragraph.
154
‘‘(ii) CRITERIA FOR CONSIDERATION.—
In granting any exemption under clause (i),
the Board shall consider, among other fac-
tors—
‘‘(I) whether information of the
type required under this paragraph is
available from a supervisory agency
(as defined in section 1101(7) of the
Right to Financial Privacy Act of
1978), the Commodity Futures Trad-
ing Commission, or a foreign regu-
latory body of a similar type;
‘‘(II) the primary business of the
company; and
‘‘(III) the nature and extent of do-
mestic or foreign regulations of the
company’s activities.
‘‘(6) EXAMINATIONS.—
‘‘(A) LIMITED
USE
OF
EXAMINATION
AU-
THORITY
FOR
FINANCIAL
SERVICES
HOLDING
COMPANIES.—The Board shall not examine,
under this section, any financial services holding
company described in paragraph (2)(A)(i) for
which an election is in effect under paragraph
155
(1) or any subsidiary (other than a depository
institution) of such holding company unless—
‘‘(i) the Board determines, on the basis
of all information available to the Board,
that—
‘‘(I) the operations or activities of
the financial services holding company
or any subsidiary of such company, or
any transaction involving such com-
pany or subsidiary and an affiliated
depository institution, may pose a ma-
terial risk to the safety and soundness
of any depository institution owned by
such holding company; or
‘‘(II) the financial services hold-
ing company does not appear to have
sufficient resources to meet the guaran-
tee required under paragraph (2); or
‘‘(ii) the Board is unable to accomplish
the 
purposes 
described 
in 
subsection
(c)(3)(A) without such examinations.
‘‘(B) LIMITED
USE
OF
EXAMINATION
AU-
THORITY FOR INVESTMENT BANK HOLDING COM-
PANIES.—The Board shall not examine, under
this section, any investment bank holding com-
156
pany described in paragraph (2)(A)(ii) which
has an election in effect under paragraph (1) or
any subsidiary (other than a depository institu-
tion) of such holding company unless—
‘‘(i) the Board determines that the op-
erations or activities of the investment bank
holding company or any subsidiary of such
company, or any transaction involving such
company or subsidiary and an affiliated
depository institution, may pose a material
risk to the safety and soundness of any de-
pository institution owned by such holding
company; or
‘‘(ii) the Board is unable to determine
from reports the nature of the operations, fi-
nancial condition, activities, or effectiveness
of the risk management systems of the in-
vestment bank holding company or any sub-
sidiary of such company, or to assess com-
pliance with the provisions of this Act and
those governing transactions and relation-
ships between any depository institution
controlled by the investment bank holding
company and the investment bank holding
company or any of such subsidiaries.
157
‘‘(C) RESTRICTED FOCUS AND DEFERENCE
IN EXAMINATIONS.—The Board shall limit the
focus and scope of any examination, under this
section, of a financial services holding company
or investment bank holding company for which
an election is in effect under paragraph (1) or
of any subsidiary (other than a depository insti-
tution) of such holding company and shall defer
to examinations conducted by the Securities Ex-
change Commission or other supervisors in ac-
cordance with subparagraphs (B), (C), and (D)
of subsection (c)(3).’’.
SEC. 125. CONVERSION OF UNITARY SAVINGS AND LOAN
HOLDING COMPANIES TO FINANCIAL SERV-
ICES HOLDING COMPANIES.
The Bank Holding Company Act of 1956 (12 U.S.C.
1841 et seq.) is amended by inserting after section 5 the
following new section:
‘‘SEC. 6. CONVERSION OF UNITARY SAVINGS AND LOAN
HOLDING COMPANIES TO FINANCIAL SERV-
ICES HOLDING COMPANIES.
‘‘(a) STREAMLINED PROCEDURE FOR CONVERSION.—
‘‘(1) IN GENERAL.—During the 18-month period
beginning on the date of the enactment of the Finan-
cial Services Competitiveness Act of 1995, no ap-
158
proval shall be required under section 3(a) or para-
graph (8) or (13) of section 4(c) for any qualified sav-
ings and loan holding company to become a financial
services holding company for any company that, both
prior to January 1, 1995, and on the date of enact-
ment of the Financial Services Competitiveness Act of
1995, is a savings and loan holding company if the
requirements of paragraph (2) are met.
‘‘(2) ELIGIBILITY REQUIREMENTS.—A qualified
savings and loan holding company shall be eligible to
become a financial services holding company pursu-
ant to paragraph (1) if—
‘‘(A) the company becomes a financial serv-
ices holding company as the result of the conver-
sion of a savings association controlled by such
company as of the date of enactment of the Fi-
nancial Services Competitiveness Act of 1995
into a bank;
‘‘(B) the company is adequately capitalized
before and immediately after the conversion re-
ferred to in subparagraph (A);
‘‘(C) all depository institutions controlled
by such company are well capitalized before and
immediately after such conversion;
159
‘‘(D) all depository institutions controlled
by such company are well managed before the
conversion;
‘‘(E) the Board would not be prohibited
under any provision of section 3(d) from approv-
ing the transaction;
‘‘(F) the activities of the company and of
each subsidiary of the company comply with this
Act (and regulations prescribed under this Act);
and
‘‘(G) the company provides the Board with
at least 30 days written notice of the proposed
conversion, and, before the expiration of such 30-
day period, the Board has not objected to the
company becoming a financial services holding
company based on the criteria contained in this
subsection.
‘‘(3) QUALIFIED
SAVINGS
AND
LOAN
HOLDING
COMPANY DEFINED.—For purposes of this subsection,
the term ‘qualified savings and loan holding com-
pany’ means any company which became a savings
and loan holding company before January 1, 1995,
and is a savings and loan holding company as of the
date of the enactment of the Financial Services Com-
petitiveness Act of 1995.
160
‘‘(b) LIMITED
RETENTION
OF
EXISTING
INVEST-
MENTS.—Any holding company which converts to a finan-
cial services holding company in accordance with subsection
(a) may retain direct or indirect ownership or control of
voting shares of any company as provided in, and subject
to, section 4(k) if—
‘‘(1) the holding company controlled 1 or more
savings associations in accordance with section
10(c)(3) of the Home Owners Loan Act before Janu-
ary 1, 1995, and as of the date of the enactment of
the Financial Services Competitiveness Act of 1995;
‘‘(2) the investment in voting shares and the fi-
nancial services holding company meet the require-
ments of section 4(k) (other than paragraph
(1)(A)(iii) of such section); and
‘‘(3) more than 75 percent of the revenues of the
financial services holding company for each of the 2
calendar years before the date such company became
a financial services holding company involved securi-
ties activities described in subparagraphs (A) and (B)
of section 10(a)(1) and activities that the Board has
determined to be permissible under section 4(c)(8).’’.
161
SEC. 126. FINANCIAL SERVICES ADVISORY COMMITTEE.
(a) ESTABLISHMENT.—There is hereby established the
Financial Services Advisory Committee (hereinafter in this
section referred to as the ‘‘Committee’’).
(b) MEMBERSHIP.—
(1) IN GENERAL.—The Committee shall consist
of 9 members, appointed as follows from among indi-
viduals who are not officers or employees of the Fed-
eral Government and who are especially qualified to
serve on such committee by virtue of their education,
training, or experience:
(A) 1 member appointed by the Secretary of
the Treasury.
(B) 2 members appointed by the Comptrol-
ler of the Currency.
(C) 2 members appointed by the Director of
the Office of Thrift Supervision.
(D) 2 members appointed by the Board of
Governors of the Federal Reserve System.
(E) 2 members appointed by the Board of
Directors of the Federal Deposit Insurance Cor-
poration.
(2) REPRESENTATION OF SMALL AND INDEPEND-
ENT DEPOSITORY INSTITUTIONS.—Of the members ap-
pointed under subparagraphs (B), (C), (D), and (E)
of paragraph (1), 1 of the 2 members appointed under
162
each such paragraph shall be appointed from among
individuals who are especially qualified to represent
the interests of depository institutions which—
(A) 
have 
total 
assets 
of 
less 
than
$500,000,000; or
(B) are not controlled by any depository in-
stitution holding company.
(c) VACANCIES.—Any vacancy on the Committee shall
be filled in the same manner in which the original appoint-
ment was made.
(d) PAY AND EXPENSES.—Members of the Committee
shall serve without pay, but each member shall be reim-
bursed for expenses incurred in connection with attendance
of such members at meetings of the Committee by the agency
which appointed such member to the Committee.
(e) TERMS.—Members shall be appointed for terms of
1 year.
(f) AUTHORITY OF THE COMMITTEE.—The Committee
may select a chairperson, vice chairperson, and secretary,
and adopt methods of procedure, and shall have power—
(1) to confer with each Federal banking agency
on general and special business conditions and regu-
latory and other matters relating to the financial
services industry in the United States and the impact
of this Act, and the amendments made by this Act, on
163
the financial service industry, especially with regard
to depository institutions described in subsection
(b)(2); and
(2) to request information from, and to make
recommendations to, each of the Federal banking
agencies with respect to matters within the jurisdic-
tion of such agency.
(g) MEETINGS.—The Committee shall meet at least 2
times each year at the call of the chairperson or a majority
of the members.
(h) REPORTS.—The Committee shall submit a semi-
annual written report to the Committee on Banking and
Financial Services of the House and to the Committee on
Banking, Housing, and Urban Affairs of the Senate. Such
report shall describe the activities of the Committee for such
semiannual period and contain such recommendations as
the Committee considers appropriate.
(i) PROVISION OF STAFF AND OTHER RESOURCES.—
Each of the Federal banking agencies shall provide the Com-
mittee with the use of such resources, including staff, as the
Committee reasonably shall require to carry out its duties,
including the preparation and submission of reports to
Congress, under this section.
(j) DEFINITIONS.—The terms ‘‘insured depository in-
stitution’’ and ‘‘Federal banking agencies’’ have the mean-
164
ing given to such terms in section 3 of the Federal Deposit
Insurance Act.
(k) FEDERAL ADVISORY COMMITTEE ACT DOES NOT
APPLY.—The Federal Advisory Committee Act shall not
apply to the Committee.
(l) SUNSET.—The Committee shall cease to exist 10
years after the enactment of this section.
SEC. 127. COORDINATION WITH STATE LAW.
Except as specifically provided in section 109, no pro-
vision of this Act, and no amendment made by this Act
to any other provision of law, may be construed as super-
seding any provision of the law of any State which imposes
additional requirements or establishes higher standards for
the safe and sound operation and condition of depository
institutions (as defined in section 3 of the Federal Deposit
Insurance Act) and the protection of consumers than the
requirements imposed or the standards established under
this Act and the amendments made by this Act to other
provisions of law (including capital standards and other
safeguards placed on affiliates).
SEC. 128. CONFORMING AMENDMENTS TO THE BANK HOLD-
ING COMPANY ACT OF 1956.
(a) SHORT TITLE; TABLE OF CONTENTS.—The first
section of the Bank Holding Company Act of 1956 (12
U.S.C. 1841 nt.) is amended to read as follows:
165
‘‘SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
‘‘(a) SHORT TITLE.—This Act may be cited as the ‘Fi-
nancial Services Holding Company Act of 1995’.
‘‘(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
‘‘Sec. 1.
Short title; table of contents.
‘‘Sec. 2.
Definitions.
‘‘Sec. 3.
Acquisition of bank shares or assets.
‘‘Sec. 4.
Interests in nonbanking organizations.
‘‘Sec. 5.
Administration.
‘‘Sec. 6.
Conversion of unitary savings and loan holding companies to financial
services holding companies.
‘‘Sec. 7.
Reservation of rights to States.
‘‘Sec. 8.
Penalties.
‘‘Sec. 9.
Judicial review.
‘‘Sec. 10. Securities activities.
‘‘Sec. 11. Safeguards relating to securities activities.
‘‘Sec. 12. Investment bank holding companies and other financial activities.
‘‘Sec. 13. Saving provision.
‘‘Sec. 14. Separability of provisions.
‘‘(c) REFERENCES IN OTHER LAWS.—Any reference in
any Federal or State law to a provision of the Bank Hold-
ing Company Act of 1956 shall be deemed to be a reference
to the corresponding provision of this Act.’’.
(b) DEFINITIONS.—
(1) Subsection (n) of section 2 of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1841(n)) is
amended by inserting ‘‘ ‘depository institution’, ’’ be-
fore ‘‘ ‘insured depository institution’ ’’.
(2) Subsection (o) of section 2 of the Bank Hold-
ing Company Act of 1956 (12 U.S.C. 1841(o)) is
amended—
166
(A) by striking paragraph (1) and inserting
the following new paragraph:
‘‘(1) LEAD DEPOSITORY INSTITUTION.—The term
‘lead depository institution’ means the largest deposi-
tory institution controlled by the financial services
holding company, based on a comparison of the aver-
age total assets controlled by each depository institu-
tion during the previous 12-month period.’’; and
(B) by adding at the end the following new
paragraphs:
‘‘(8) INSURED
DEPOSITORY
INSTITUTION
FOR
CERTAIN SECTIONS.—Notwithstanding subsection (n),
the terms ‘depository institution’ and ‘insured deposi-
tory institution’ include, for purposes of paragraph
(1) and sections 4(k), 10, and 11, any branch, agency,
or commercial lending company operated in the Unit-
ed States by a foreign bank.
‘‘(9) WELL MANAGED.—The term ‘well managed’
means—
‘‘(A) in the case of any company or deposi-
tory institution which receives examinations, the
achievement of—
‘‘(i) a CAMEL composite rating of 1
or 2 (or an equivalent rating under an
equivalent rating system) in connection
167
with the most recent examination or subse-
quent review of such company or institu-
tion; and
‘‘(ii) at least a satisfactory rating for
management, if such rating is given; or
‘‘(B) in the case of a company or depository
institution that has not received an examination
rating, the existence and use of managerial re-
sources which the Board determines are satisfac-
tory.’’.
(3) Section 2 of the Bank Holding Company Act
of 1956 (12 U.S.C. 1841) (as amended by section
116(a)(1) of this Act) is amended by inserting after
subsection (o) the following new subsections:
‘‘(p) SECURITIES AFFILIATE.—The term ‘securities af-
filiate’ means any company—
‘‘(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.
‘‘(q) CAPITAL TERMS.—
‘‘(1) DEPOSITORY INSTITUTIONS.—With respect
to depository institutions, the terms ‘well capitalized,’
168
‘adequately capitalized’ and ‘undercapitalized’ have
the meanings given to such terms in accordance with
section 38(b) of the Federal Deposit Insurance Act.
‘‘(2) FINANCIAL SERVICES HOLDING COMPANY.—
The following definitions shall apply with respect to
financial services holding companies:
‘‘(A) ADEQUATELY CAPITALIZED.—The term
‘adequately capitalized’ means a level of capital-
ization which meets or exceeds the required mini-
mum level established by the Board for each rel-
evant capital measure for financial services hold-
ing companies.
‘‘(B) WELL CAPITALIZED.—The term ‘well
capitalized’ means a level of capitalization which
meets or exceeds the required capital levels estab-
lished by the Board for well capitalized financial
services holding companies.
‘‘(3) OTHER CAPITAL TERMS.—The terms ‘tier 1’
and ‘risk-weighted assets’ have the meaning given
those terms in the capital guidelines or regulations
established by the Board for financial services holding
companies.
‘‘(r) FOREIGN BANK TERMS.—For purposes of sub-
sections (s) and (u), sections 4(k), 10, and 11, and sub-
sections (b) and (c) of section 12—
169
‘‘(1) the terms ‘agency’, ‘branch’, and ‘commer-
cial lending company’ have the same meaning as in
section 1(b) of the International Banking Act of 1978.
‘‘(2) the term ‘foreign bank’ means a foreign
bank (as defined in section 1(b) of the International
Banking Act of 1978) which operates a branch, agen-
cy or commercial lending company, or owns or con-
trols a bank, in the United States.’’.
(c) AMENDMENT REGARDING CONDITIONAL APPROVAL
OF NOTICES.—Section 4(a)(2) of the Bank Holding Com-
pany Act of 1956 (12 U.S.C. 1843(a)(2)) is amended by
striking ‘‘paragraph (8)’’ and all that follows through ‘‘is-
sued by the Board under such paragraph’’ and inserting
‘‘subsection (c)(8) or section 4(k), 10, or 11, subject to all
the conditions specified in those provisions or in any order
or regulation issued by the Board under those provisions’’.
(d) AMENDMENT TO NOTICE PROCEDURES.—Section
4(j) of the Bank Holding Company Act of 1956 (12 U.S.C.
1843(j)) is amended—
(1) in paragraph (1)(A), by striking ‘‘subsection
(c)(8) or (a)(2)’’ and inserting ‘‘subsection (a)(2),
(c)(8), (c)(15), or (k)’’;
(2) in paragraph (1)(E)—
170
(A) by striking ‘‘subsection (c)(8) or (a)(2)’’
and inserting ‘‘subsection (a)(2), (c)(8), (c)(15),
or (k)’’; and
(B) by striking the last sentence and insert-
ing the following: ‘‘In no event may the Board,
without the agreement of the financial services
holding company submitting the notice, extend
the notice period under this subparagraph be-
yond the period that ends 180 days after the date
that a notice is filed with the Board or the rel-
evant Federal reserve bank in accordance with
the regulations of the Board.’’; and
(3) in paragraph (2), by redesignating subpara-
graphs (B) and (C) as subparagraphs (C) and (D),
respectively, and inserting after subparagraph (A) the
following new subparagraph:
‘‘(B) CRITERIA FOR NOTICES INVOLVING SE-
CURITIES AFFILIATES.—In considering any no-
tice that involves the acquisition of shares of a
securities affiliate pursuant to section 4(c)(15),
the Board shall apply the criteria and safe-
guards contained in this paragraph and in sec-
tions 10 and 11.’’.
171
(e) ELIMINATION
OF OBSOLETE PROVISIONS.—The
Bank Holding Company Act of 1956 (12 U.S.C. 1841
through 1849) is amended—
(1) in section 4(a)(2)—
(A) by striking ‘‘or in the case of a com-
pany’’ and ending ‘‘after December 31, 1980,’’;
and
(B) by striking the sentence beginning ‘‘Not-
withstanding any other provision of this para-
graph’’;
(2) in section 4(b), by striking ‘‘After two years
from the date of enactment of this Act, no’’ and in-
serting ‘‘No’’; and
(3) in section 5(a)—
(A) by striking ‘‘Within one hundred and
eighty days after the date of enactment of this
Act, or within’’ and inserting ‘‘Within’’; and
(B) by striking ‘‘whichever is later,’’.
(f) CONFORMING AMENDMENTS.—The Bank Holding
Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended
as follows:
(1) In section 3(c)(4), by striking ‘‘one-bank
holding company’’ each place such term appears and
inserting ‘‘1-bank financial services holding com-
pany’’.
172
(2) In section 3(f)(5), by striking ‘‘bank holding
company’’ the first and second time such term ap-
pears and inserting ‘‘financial services holding com-
pany’’.
(3) In section 4(i)(3)(A), by striking ‘‘is ac-
quired’’ and inserting ‘‘was acquired’’.
(4) By striking ‘‘bank holding companies’’ each
place such appears in the following sections and in-
serting ‘‘financial services holding companies’’:
(A) Section 3(d).
(B) Section 4(f).
(C) Section 7(a).
(5) By striking ‘‘bank holding company’s’’ each
place such term appears in section 4(c)(14) and in-
serting ‘‘financial services holding company’s’’.
(6) By striking ‘‘bank holding company’’ each
place such term appears in the following sections and
inserting ‘‘financial services holding company’’:
(A) Subsections (a), (d), (e), (g), (h), and
(o) of section 2.
(B) Subsections (a), (b), (d), (f)(1), (f)(2),
and (f)(3) of section 3.
(C) Subsections (a), (d), (e), (g), (h), and (j)
of section 4.
173
(D) Clause (ii) in the portion of section 4(c)
which precedes paragraph (1) of such section.
(E) Paragraphs (2), (3), (7), (8), (10), (11),
(12)(A), and (14) of section 4(c).
(F) Paragraphs (4), (5), and (9) of section
4(f).
(G) Paragraphs (1) and (2) of section 4(i).
(H) Sections 5, 7(b), 8, and 11.
(7) In section 4(f)(1), by striking ‘‘bank holding
company’’ the 2d place such term appears and insert-
ing ‘‘financial services holding company’’.
(8) In the headings for section 3(f) and 4(f), by
striking ‘‘BANK HOLDING’’ and inserting ‘‘FINANCIAL
SERVICES HOLDING’’.
(9) In the heading the heading for section
2(o)(7), by striking ‘‘BANK’’ and inserting ‘‘FINANCIAL
SERVICES’’.
(g) TREATMENT OF EXISTING BANK HOLDING COMPA-
NIES.—Section 2(a)(6) of the Bank Holding Company Act
of 1956 (12 U.S.C. 1841(a)(6)) is amended by inserting at
the end the following: ‘‘Any company that was a bank hold-
ing company on the day before the date of enactment of
the Financial Services Competitiveness Act of 1995 shall,
for purposes of this chapter, be deemed to have been a finan-
174
cial services holding company as of the date on which the
company became a bank holding company.’’.
(h) OTHER REFERENCES.—Any reference in any Fed-
eral law to ‘‘bank holding company’’ or ‘‘bank holding com-
panies’’ as those terms were defined under the Bank Hold-
ing Company Act of 1956 before the enactment of this Act
shall be deemed to include a reference to ‘‘financial services
holding company’’ and ‘‘financial services holding compa-
nies’’, respectively, as such terms are defined under the Fi-
nancial Services Holding Company Act of 1995.
SEC. 129. CONFORMING AMENDMENTS TO THE BANK HOLD-
ING COMPANY ACT AMENDMENTS OF 1970.
Section 106 of the Bank Holding Company Act
Amendments of 1970 (12 U.S.C. 1971 through 1978) is
amended by striking ‘‘bank holding company’’ each place
such term appears and inserting ‘‘financial services holding
company’’.
SEC. 130. CREDIT CARDS FOR BUSINESS PURPOSES.
Section 2(c)(2)(F) of the Bank Holding Company Act
of 1956 (relating to the definition of credit card banks) is
amended—
(1) in clause (i), by inserting ‘‘including the pro-
vision of credit card accounts for business purposes’’
before the semicolon; and
175
(2) in clause (v), by inserting ‘‘(other than the
provision of credit card accounts for business pur-
poses in connection with the credit card operations re-
ferred to in clause (i))’’ before the period.
Subtitle 
D—Interagency 
Banking
and Financial Services Advisory
Committee
SEC. 141. INTERAGENCY BANKING AND FINANCIAL SERV-
ICES ADVISORY COMMITTEE.
(a) ESTABLISHMENT; COMPOSITION.—There is estab-
lished the Banking and Financial Services Advisory Com-
mittee which shall consist of 6 members as follows:
(1) The Secretary of the Treasury.
(2) The Chairman of the Board of Governors of
the Federal Reserve System.
(3) The Chairperson of the Board of Directors of
the Federal Deposit Insurance Corporation.
(4) The Chairman of the Securities and Ex-
change Commission.
(5) The Chairperson of the Commodities Futures
Trading Commission.
(6) The Comptroller of the Currency.
(b) CHAIRPERSON.—The chairperson of the Committee
shall be the Secretary of the Treasury.
176
(c) DESIGNATION OF OFFICERS AND EMPLOYEES.—
The members of the Committee may, from time to time, des-
ignate other officers or employees of their respective agencies
to carry out their duties on the Committee.
(d) COMPENSATION AND EXPENSES.—Each member of
the Committee shall serve without additional compensation
but shall be entitled to reasonable expenses incurred in car-
rying out official duties as a member.
(e) FUNCTION OF THE COMMITTEE.—
(1) IN GENERAL.—The Committee shall meet as
appropriate to consider matters of mutual interest to
the members and to consider making recommenda-
tions to the Board of Governors of the Federal Reserve
System regarding the types of activities that may be
financial in nature for purposes of the Financial
Services Holding Company Act and to the Comptrol-
ler of the Currency regarding the types of activities
that may be incidental to banking for purposes of sec-
tion 5136 of the Revised Statutes of the United States.
(2) CONSIDERATION
OF
RECOMMENDATIONS.—
The Board of Governors of the Federal Reserve Sys-
tem and the Comptroller of the Currency, as appro-
priate, shall take into account any recommendation
made to the respective agency by the Committee and,
177
if the agency does not adopt the recommendation,
shall provide a written explanation to the Committee.
(f) IMPROVING THE SUPERVISION, EFFICIENCY, AND
COMPETITIVENESS OF THE FINANCIAL SERVICES INDUS-
TRY.—
(1) IN GENERAL.—The Committee shall seek to
improve the supervision, efficiency, and competitive-
ness of the financial services industry by making rec-
ommendations for such legislative or administrative
action as the Committee determines to be appropriate
to the Congress, each agency or office represented by
a member on the Committee, and other agencies or de-
partments of the United States, including rec-
ommendations for changes in law and in the regula-
tions, policies, and procedures of any department or
agency.
(2) PRINTING
IN
FEDERAL
REGISTER.—Rec-
ommendations from paragraph (1) shall be printed in
the Federal Register and submitted to the Committee
on Banking and Financial Services of the House of
Representatives and the Committee on Banking,
Housing, and Urban Affairs of the Senate.
178
TITLE II—FUNCTIONAL
REGULATION
Subtitle A—Brokers and Dealers
SEC. 201. DEFINITION OF BROKER.
(a) IN GENERAL.—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—
‘‘(i) publicly solicits the business of
effecting securities transactions for the ac-
count of others;
‘‘(ii) is compensated for such business
by the payment of commissions or similar
remuneration based on effecting trans-
actions in securities (other than fees cal-
culated as a percentage of assets under
management) in excess of the bank’s incre-
mental 
costs 
directly 
attributable 
to
179
effecting such transactions (hereafter re-
ferred to as ‘incentive compensation’); or
‘‘(iii) is a separately identifiable de-
partment or division of the bank.
‘‘(C) EXEMPTION FOR CERTAIN BANK AC-
TIVITIES.—A bank shall not be deemed to be a
broker because it engages in any of the following
activities under the conditions described:
‘‘(i) THIRD
PARTY
BROKERAGE
AR-
RANGEMENTS.—The bank enters into a con-
tractual 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 clear-
ly identified as the person performing
the brokerage services;
‘‘(II) the broker or dealer performs
brokerage services in an area that is
clearly marked and, unless made im-
possible by space or personnel consider-
ations, physically separate from the
routine deposit-taking activities of the
bank;
180
‘‘(III) any materials used by the
bank to advertise or promote generally
the availability of brokerage services
under the contractual or other arrange-
ment clearly indicate that the broker-
age service are being provided by the
broker or dealer and not by the bank;
‘‘(IV) any materials used by the
bank to advertise or promote generally
the availability of brokerage services
under the contractual or other arrange-
ment are in compliance with the Fed-
eral securities laws before distribution;
‘‘(V) bank employees perform only
clerical or ministerial functions in
connection with brokerage transactions,
including 
scheduling 
appointments
with the associated persons of a broker
or dealer and, on behalf of a broker or
dealer, transmitting orders or handling
customers funds or securities, except
that bank employees who are not so
qualified may describe in general terms
investment vehicles under the contrac-
tual or other arrangement and accept
181
customer orders on behalf of the broker
or dealer if such employees have re-
ceived training that is substantially
equivalent to the training required for
personnel qualified to sell securities
pursuant to the requirements of a self-
regulatory organization (as defined in
section 3(a) of the Securities Exchange
Act of 1934);
‘‘(VI) bank employees do not di-
rectly receive incentive compensation
for any brokerage transaction unless
such employees are associated persons
of a broker or dealer and are qualified
pursuant to the requirements of a self-
regulatory organization (as so defined)
except that the bank employees may re-
ceive nominal cash and noncash com-
pensation for customer referrals if the
cash compensation is a 1-time fee of a
fixed dollar amount and the payment
of the fee is not contingent on whether
the referral results in a transaction;
‘‘(VII) such services are provided
by the broker or dealer on a basis in
182
which all customers which receive any
services are fully disclosed to the broker
or dealer; and
‘‘(VIII) the broker or dealer in-
forms each customer that the brokerage
services are provided by the broker or
dealer and not by the bank and that
the securities are not deposits or other
obligations of the bank, are not guar-
anteed by the bank, and are not in-
sured by the Federal Deposit Insurance
Corporation.
‘‘(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 function-
ally equivalent accounts of a bank) unless
the bank—
183
‘‘(I) publicly solicits brokerage
business, other than by advertising that
it effects transactions in securities in
conjunction with advertising its other
trust activities; or
‘‘(II) receives incentive compensa-
tion for such brokerage activities.
‘‘(iii) 
PERMISSIBLE
SECURITIES
TRANSACTIONS.—The bank effects trans-
actions in exempted securities, other than
municipal securities, or in commercial
paper, bankers acceptances, commercial
bills, qualified Canadian Government obli-
gations as defined in section 5136 of the Re-
vised Statues, obligations of the Washington
Metropolitan Area Transit Authority which
are guaranteed by the Secretary of Trans-
portation under section 9 of the National
Capital Transportation Act of 1969, obliga-
tions of the North American Development
Bank, and obligations of any local public
agency (as defined in section 110(h) of the
Housing Act of 1949) or any public housing
agency (as defined in the United States
Housing Act of 1937) that are expressly au-
184
thorized by section 5136 of the Revised Stat-
utes of the United States as permissible for
a national bank to underwrite or deal in.
‘‘(iv) MUNICIPAL
SECURITIES.—The
bank effects transactions in municipal secu-
rities.
‘‘(v) EMPLOYEE
AND
SHAREHOLDER
BENEFIT
PLANS.—The bank effects trans-
actions as part of any bonus, profit-sharing,
pension, retirement, thrift, savings, incen-
tive, stock purchase, stock ownership, stock
appreciation, stock option, dividend rein-
vestment, or similar plan for employees or
shareholders of an issuer or its subsidiaries.
‘‘(vi) SWEEP ACCOUNTS.—The bank ef-
fects transactions as part of a program for
the investment or reinvestment of bank de-
posit funds into any no-load, open-end
management investment company registered
under the Investment Company Act of 1940
that holds itself out as a money market
fund.
‘‘(vii) AFFILIATE TRANSACTIONS.—The
bank effects transactions for the account of
any affiliate of the bank, as defined in sec-
185
tion 2 of the Financial Services Holding
Company Act of 1995.
‘‘(viii) PRIVATE
SECURITIES
OFFER-
INGS.—The bank—
‘‘(I) effects sales as part of a pri-
mary offering of securities by an is-
suer, 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 there-
under;
‘‘(II) effects such sales exclusively
to an accredited investor, as defined in
section 3 of the Securities Act of 1933;
and
‘‘(III) if affiliated with a securi-
ties affiliate, as provided under section
10 of the Financial Services Holding
Company Act of 1995—
‘‘(aa) has not been so affili-
ated for more than 1 year; or
‘‘(bb) 
effects 
such 
sales
through a separately identifiable
department or division that itself
shall be deemed to be a broker.
186
‘‘(ix) DE MINIMIS EXEMPTION.—If the
bank does not have a subsidiary or affiliate
registered as a broker or dealer under sec-
tion 15, the bank effects, other than in
transactions 
referenced 
in 
clauses 
(i)
through (viii), not more than—
‘‘(I) 800 transactions in any cal-
endar year in securities for which a
ready market exists, and
‘‘(II) 200 other transactions in se-
curities in any calendar year.
‘‘(x) 
SAFEKEEPING
AND
CUSTODY
SERVICES.—The bank, as part of customary
banking activities—
‘‘(I) provides safekeeping or cus-
tody services with respect to securities,
including the exercise of warrants or
other rights on behalf of customers;
‘‘(II) clears or settles transactions
in securities;
‘‘(III) effects securities lending or
borrowing transactions with or on be-
half of customers as part of services
provided to customers pursuant to
subclauses (I) and (II) or invests cash
187
collateral pledged in connection with
such transactions; or
‘‘(IV) holds securities pledged by 1
customer to another customer or securi-
ties subject to resale agreements be-
tween customers or facilitates the
pledging or transfer of such securities
by book entry.
‘‘(xi) BANKING PRODUCTS.—The bank
effects transactions that have been deter-
mined pursuant to section 10(k)(3)(C) to be
more appropriately treated as banking
products, if the bank effects such trans-
actions through a separately identifiable de-
partment or division that itself shall be
deemed to be a broker.
‘‘(D) EXEMPTION
FOR
ENTITIES
SUBJECT
TO SECTION 15(e).—The term ‘broker’ does not
include a bank that—
‘‘(i) was, immediately prior to the en-
actment of the Financial Services Competi-
tiveness Act of 1995, subject to section 15(e);
and
188
‘‘(ii) is subject to such restrictions and
requirements as the Commission deems ap-
propriate.’’.
(b) SEPARATELY IDENTIFIABLE DEPARTMENT OR DI-
VISION DEFINED.—Section 3(a) of the Securities Exchange
Act of 1934 (15 U.S.C. 78c(a)) is amended by adding at
the end the following new paragraph:
‘‘(54) For purposes of paragraphs (4) and (5),
the term ‘separately identifiable department or divi-
sion’ of a bank means a unit—
‘‘(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 activities, 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 activities described in paragraphs (4) and (5)
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 oth-
erwise accessible as to permit independent exam-
ination and enforcement of this Act and rules
and regulations promulgated under this Act.’’.
189
(c) REGULATION.—Section 15(c) of the Securities Ex-
change Act of 1934 (15 U.S.C. 78o(c)) is amended by add-
ing at the end the following new paragraph:
‘‘(8)(A) The Commission may prescribe rules,
after consultation with and considering the views of
the appropriate Federal banking agencies, with re-
spect to a broker or dealer that is a separately identi-
fiable department or division of a bank as the Com-
mission finds necessary in the public interest or for
the protection of investors to take into account the
characteristics of a separately identifiable department
or division of a bank.
‘‘(B) If a bank of which a separately identifiable
department or division is a part is adequately cap-
italized (as defined by the bank’s appropriate Federal
banking agency), the separately identifiable depart-
ment or division that is a broker or dealer shall be
deemed to be in compliance with the net capital rules
adopted pursuant to paragraph (3).’’.
SEC. 202. DEFINITION OF DEALER.
Section 3(a)(5) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(5)) is amended to read as follows:
‘‘(5) DEALER.—
‘‘(A) IN
GENERAL.—The term ‘dealer’
means any person engaged in the business of
190
buying and selling securities for his own account
through a broker or otherwise.
‘‘(B) EXCEPTIONS.—Such term does not in-
clude—
‘‘(i) a person that buys or sells securi-
ties for such person’s own account, either
individually or in a fiduciary capacity, but
not as a part of a regular business; or
‘‘(ii) a bank, to the extent that the
bank—
‘‘(I) buys and sells commercial
paper, bankers acceptances, exempted
securities (other than municipal secu-
rities), qualified Canadian Govern-
ment obligations as defined in section
5136 of the Revised Statues, obliga-
tions of the Washington Metropolitan
Area Transit Authority which are
guaranteed by the Secretary of Trans-
portation under section 9 of the Na-
tional Capital Transportation Act of
1969, obligations of the North Amer-
ican Development Bank, and obliga-
tions of any local public agency (as de-
fined in section 110(h) of the Housing
191
Act of 1949) or any public housing
agency (as defined in the United States
Housing Act of 1937) that are ex-
pressly authorized by section 5136 of
the Revised Statutes of the United
States as permissible for a national
bank to underwrite or deal in;
‘‘(II) buys and sells municipal se-
curities;
‘‘(III) buys and sells securities for
investment purposes for the bank or for
accounts for which the bank acts as a
trustee or fiduciary;
‘‘(IV) engages in the issuance or
sale of designated asset-back securities
through a grantor trust or otherwise
and—
‘‘(aa) has not been affiliated
with a securities affiliate under
section 10 of the Financial Serv-
ices Holding Company Act of
1995 for more than 1 year; or
‘‘(bb) 
effects 
such 
trans-
actions through a separately iden-
tifiable department or division
192
that itself shall be deemed to be a
dealer; or
‘‘(V) buys and sells securities that
have been determined pursuant to sec-
tion 10(k)(3)(C) to be more appro-
priately treated as banking products, if
a separately identifiable department or
division that itself is deemed to be a
broker or dealer for purposes of this
Act engages in such purchases and
sales.
‘‘(C) DESIGNATED ASSET-BACKED SECURI-
TIES DEFINED.—For purposes of subparagraph
(B)(ii)(IV), the term ‘designated asset-backed se-
curities’ means—
‘‘(i) securities backed by or represent-
ing an interest in 1–4 family residential
mortgages originated or purchased by the
bank, its affiliates, or its subsidiaries; and
‘‘(ii) securities backed by or represent-
ing an interest in consumer receivables or
consumer leases originated or purchased by
the bank, its affiliates, or its subsidiaries.’’.
193
SEC. 203. POWER TO EXEMPT FROM THE DEFINITIONS OF
BROKER AND DEALER.
Section 3 of the Securities Exchange Act of 1934 (15
U.S.C. 78c) is amended by adding at the end the following:
‘‘(e) EXEMPTION FROM DEFINITION OF BROKER OR
DEALER.—The Commission, by regulation or order, upon
its own motion or upon application, may conditionally or
unconditionally exclude any person or class of persons from
the definitions of ‘broker’ or ‘dealer’, if the Commission
finds that such exclusion is consistent with the public inter-
est, the protection of investors, and the purposes of this
title.’’.
SEC. 204. MARGIN REQUIREMENTS.
(a) Section 7(d) of the Securities Exchange Act of 1934
(15 U.S.C. 15g(d)) is amended by striking ‘‘or (E)’’ and
inserting ‘‘(E) to a loan to a broker or dealer by a member
bank or any other person that has entered into an agree-
ment pursuant to section 8(a) if the proceeds of the loan
are to be used in the ordinary course of the broker’s or deal-
er’s business other than for the purpose of funding the pur-
chase of securities for the account of such broker or dealer,
or (F)’’.
(b) Section 8(a) of the Securities and Exchange Act
of 1934 is amended—
(1) by striking ‘‘nonmember bank’’ and inserting
‘‘person other than a member bank’’; and
194
(2) by striking ‘‘such bank’’ in the second sen-
tence and inserting ‘‘such person’’.
SEC. 205. EFFECTIVE DATE.
This subtitle shall become effective 270 days after the
date of enactment of this Act.
Subtitle B—Bank Investment
Company Activities
SEC. 211. CUSTODY OF INVESTMENT COMPANY ASSETS BY
AFFILIATED BANK.
(a) MANAGEMENT COMPANIES.—Section 17(f) of the
Investment Company Act of 1940 (15 U.S.C. 80a–17(f)) is
amended—
(1) by redesignating paragraphs (1), (2), and (3)
as subparagraphs (A), (B), and (C), respectively;
(2) by striking ‘‘(f) Every registered’’ and insert-
ing ‘‘(f) CUSTODY OF SECURITIES.—
‘‘(1) Every registered’’;
(3) by designating the 2d, 3d, 4th, and 5th sen-
tences of such subsection as paragraphs (2) through
(5), respectively, and indenting the left margin of
such paragraphs appropriately; and
(4) by adding at the end the following new para-
graph:
‘‘(6) Notwithstanding any provision of this sub-
section, if a bank described in paragraph (1) or an
195
affiliated person of such bank is an affiliated person,
promoter, organizer, or sponsor of, or principal un-
derwriter for the registered company, such bank may
serve as custodian under this subsection in accordance
with such rules, regulations, or orders as the Commis-
sion may prescribe, consistent with the protection of
investors, after consulting in writing with the appro-
priate Federal banking agency, as defined in section
3 of the Federal Deposit Insurance Act.’’.
(b) UNIT INVESTMENT TRUSTS.—Section 26(a)(1) of
the Investment Company Act of 1940 (15 U.S.C. 80a–
26(a)(1)) is amended by inserting before the semicolon at
the end the following: ‘‘, except that, if the trustee or custo-
dian described in this subsection is an affiliated person of
such underwriter or depositor, the Commission may adopt
rules and regulations or issue orders, consistent with the
protection of investors, prescribing the conditions under
which such trustee or custodian may serve, after consulting
in writing with the appropriate Federal banking agency
(as defined in section 3 of the Federal Deposit Insurance
Act)’’.
(c) FIDUCIARY DUTY OF CUSTODIAN.—Section 36(a)
of the Investment Company Act of 1940 (15 U.S.C. 80a–
35(a)) is amended—
196
(1) in paragraph (1), by striking ‘‘or’’ at the
end;
(2) in paragraph (2), by striking the period at
the end and inserting ‘‘; or ‘‘; and
(3) by inserting after paragraph (2) the follow-
ing:
‘‘(3) as custodian.’’.
SEC. 212. INDEBTEDNESS TO AFFILIATED PERSON.
Section 10(f) of the Investment Company Act of 1940
(15 U.S.C. 80a–10(f)) is amended—
(1) in the 1st sentence, by striking ‘‘issuer) a
principal underwriter’’ and inserting ‘‘issuer)—
‘‘(1) a principal underwriter’’; and
(2) by striking ‘‘for the issuer. The Commission’’
and inserting ‘‘for the issuer; or
‘‘(2) the issuer of which has a material lending
relationship with the adviser of such registered invest-
ment company or any person controlling, controlled
by, or under common control with the adviser in con-
travention of such rules, regulations, or orders as the
Commission may prescribe in the public interest and
consistent with the protection of investors.
The Commission’’.